Central Bank in talks with finance sector to provide fresh relief to borrowers

• Yet to announce nature of relief; but rules out blanket moratorium 
• Banking and finance sector companies at different levels with  diverse capacity to tackle issue
• Small biz and daily income earners excessively affected by current spate of restrictions

The Central Bank is engaged with banks and finance companies to see if some form of relief could be afforded to borrowers troubled by the ongoing restrictions on businesses and livelihood imposed by the authorities to stem to virus spread.

While the Central Bank did not specifically mention the nature of the relief, they said it might not be a blanket moratorium in the scale of what was seen last year as the financial sector is only just coming out of two broad based payment holiday schemes which ended in March 2021. 

And the banks also have to meet the interests of depositors, which happens only if the loan customers service their facilities. 

The tourism sector and the passenger transport sector are still under moratorium through September end due to the lingering effects of the pandemic on the two sectors, which became direct casualties of the virus. 

Small and medium enterprises last week called for another round of payment relief on their loan repayments as they are increasingly facing pressure on their working capital as sales have dried up, but payments to suppliers, employees and other bills have piled up. 

“Based on the more recent situation that we are going through, we have already started discussions with banks and The Finance Houses Association to see how best and what kind of a facilitation can be given to the borrowers because we can understand that there can be payment delays because of the closure of certain businesses and may be the income generating activities have got disturbed”, said the Deputy Governor T.M.J.Y.P Fernando. Small businesses and daily income earners are disproportionately affected by the current spate of restrictions than the big businesses, businesses in the export oriented sector and those who are designated as essential services, though they are also not entirely immune.  

The healthcare sector, whose views are gaining more prominence since of late renewed their calls for a complete lockdown of the country last week for two weeks.

However, a country’s success depends on how it can contain the epidemic while keeping a working economy. 
Central Bank last week emphasised that the Sri Lankan economy cannot withstand another contraction in the style of 2020 as its buffers are running thin. 

State coffers run dry when tax income generating businesses and livelihoods get disrupted; export incomes fall when factories cannot get their employees back at work and price pressures mount when the government is forced to sustain a non-working population through handouts, making people impoverished. 

Central Bank Governor Prof. W.D. Lakshman last week insisted on striking a balance between the virus containing measures and their larger economic toll when dealing with the pandemic, as the living standards of more than a third of the population, which is considered vulnerable, are at great stake if a full-scale lockdown goes into effect.  
According to Deputy Governor Fernando, the Central Bank is planning to make an announcement of the nature of the relief once the ongoing discussions with the banks and finance companies come to an end. 

“By all means any bank will definitely consider that in a favourable way because they also want their loans to be paid on time or without completely not being paid. So, the discussions have been quite favourable and they have agreed to give some kind of facilitation,” she said.     

“But at this point of time we are not looking at a complete moratorium because we cannot do that from the point of view of the banks and finance companies side because we also have to understand that in this banking and finance sector, companies are at different levels because all companies do not have the capacity to go through the process of moratoria continuously,” she added.