Central Bank to meet CRIB, banks on facilitating COVID-hit borrowers

The Central Bank will soon meet with the Credit Information Bureau of Sri Lanka (CRIB) and the banking sector to see how to facilitate borrowers who are seeking to obtain new facilities but unable to do so due to a soured credit scores caused predominantly by pandemic-induced hardships. 

At each round of payment relief and moratoria afforded to the pandemic affected borrowers, the Central Bank asked banks to refrain from declining applications from borrowers for new loans, “solely based on the adverse CRIB report”, as it is unfair by such borrowers. 

However, there have been some cases where such requests for new loans by those who are under moratoria, specially by small and medium sized enterprises have been declined by banks on the basis of bad credit score.
“I expect to meet the officials in the CRIB as well as the banking sector on this matter soon”, Central Bank Governor Ajith Nivard Cabraal said. 

Speaking at a media briefing last week, Cabraal said there is a widespread misconception that being in the CRIB is something bad.  

Yet, it is an institution, which provides information about one’s credit standing assigned with a credit score based on the level of creditworthiness. 

Hence information relating to both repayment and non-repayment of one’s loans is obtained through the CRIB. 
“There are instances I know where people have been given new loans when they have not so good credit scores in the CRIB. And there are some instance others have been declined,” Cabraal noted. 

“If that difficulty has arisen as a result of the COVID pandemic, we issued instructions to banks to consider it when loaning funds to such borrowers without completely rejecting requests for loans from such customers,” he added.

In order to ensure that borrowers who opt for COVID relief schemes won’t get their credit scores adversely affected depriving them of access to additional bank funding, the Central Bank had given instructions to banks to develop a reporting mechanism, in consultation with the CRIB to report deferments and facility restructuring having to be made due to the pandemic stresses. Although there were instances by the end of September quarter last year, where up to 50 percent of some banks’ loan books were under moratoria, that came down gradually to only loans to the travel and tourism industries by April this year, before new rounds of moratoria had to be rolled out again from May due to the virus resurgence. As the third quarter earnings season is set to begin shortly, banks are expected to report as to what extent their loan portfolios are under payment holidays by the end of September in their earnings reports. While the general moratorium on loans were extended through December this year with the exception of tourism industry, which enjoys payment holidays through June next year, the Central Bank expects to unwind the moratoria from next year by replacing it with a long-term plan to support businesses, which will continue to face prolonged hardships stemming from the pandemic.