Loans under CB liquidity support scheme gather steam

• CB approves Rs.25bn in new loans in just 8 days   
• Cumulative approvals under the scheme top Rs.53bn 
• Disbursements reach Rs.21bn with services sector leading 
• Constructions sector becomes second leading candidate with most number of applications   

Loans under the Central Bank liquidity support scheme to assist pandemic-affected businesses gathered steam as of late as the banking sector regulator granted approval for 6,314 new applications for Rs.25.3 billion worth loans at 4 percent during the eight days from June 25 to July 2. 

This is about the same amount of loans approved under the scheme since April 1 to June 24 after the Central Bank announced the credit scheme on March 24 under ‘Saubagya COVID-19 Renaissance Facility.’ 

The scheme was set up to provide Central Bank liquidity to the banks under a refinance scheme at 1 percent to give loans to the pandemic-affected businesses and self-employed at 4 percent for a period of 2 years including a 6-month grace period to help them stay afloat until the economy recovers. 

During the initial period that ended on June 24, the Central Bank granted approval for Rs.27.9 billion loans, which came in through 13, 861 applications, the bank 
said in a statement.

This brings the total approvals under the scheme to Rs.53.3 billion entertaining 20,240 applications since the scheme started taking applications from April 1.

Hence, this effectively exhausted the initial Rs.50 billion made available under the scheme on March 24. However the Central Bank later decided to go up to Rs.150 billion on June 16 after it came under fire from the President Gotabaya Rajapaksa for not doing enough to support the economy beset by the pandemic.

Since that infamous episode, the Central Bank has been pushing banks to expedite loan disbursements while the bank itself has stepped up its credit approval mechanism churning out nearly 800 approved applications daily.
The Central Bank identifies the period from April 1 to June 18 as the Phase I of the support scheme and June 19 to July 2 as the Phase II, during which it tripled the amount of liquidity available. 

It delivered the Phase III with a credit guarantee and interest subsidy scheme effective from July 1, “with a view to accelerating lending at 4 percent per annum using the already available excess liquidity with licensed banks and to ensure adequate flow of funds for businesses which lack collateral to back their creditworthiness,” the Central Bank said.  

Among the banks, Commercial Bank of Ceylon tops the list with nearly 4,000 applications for Rs.17.1 billion loans followed by People’s Bank with 4, 232 applications for Rs.6.1 billion loans and Regional Development Bank with 3,371 applications for Rs.1.7 billion loans. 

Meanwhile, the banks have disbursed more than Rs.21 billion in Saubagya loans among 10, 270 affected businesses and individuals as of July 2. 

Out of the total approved loans, 45 percent is to the services sector led by trade services while 38 percent for industry sector and 17 percent for agriculture sector, the Central Bank data showed. 

Meanwhile, the construction sector became the second largest candidate after trade services, which sought financial assistance under the scheme with 2,286 applications for Rs.6.1 billion after the Central Bank on June 16 said the sector would be provided with a facility to borrow from LCBs, using guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past, under a new dedicated credit scheme funded by the Central Bank and made available at the aforementioned 
concessionary rates.