New authority underway to evaluate parate execution

By Nishel Fernando

The government plans to establish an intermediate regulatory authority with powers to determine the auctioning of assets of defaulted borrowers under parate execution, Justice Minister Wijeyadasa Rajapakshe said.

“We believe that there should be an intermediate regulatory authority. Therefore an amendment related to this is expected in parliament,” Rajapakshe said.
Currently, the Board of respective banks approves auctioning of assets of defaulted borrowers under parate execution.  In addition, the Supreme Court last year, in a landmark ruling, unanimously held that properties mortgaged to banks, not only by an actual borrower but also by a third party for the loan granted to the actual borrower, can be sold at an auction to recover the unpaid loan and interest thereon. 

The proposed authority is to be tasked with examining the viability of restructuring the bad loans and granting fresh loans in order to revive struggling businesses, before granting approval for parate execution.  

If parate execution deems to be reasonable, the proposed authority is to issue a “certificate” to auction off collateral of defaulted borrowers. 

Meanwhile, State Minister of Finance Shehan Semasinghe noted that President Ranil Wickremesinghe is expected to hold several meetings with bankers to implement the suspension of parate execution of banks approved by the Cabinet of Ministers early this week.