Only 10-20% of loans coming out of moratoria deemed problematic

• CB says such loans may need special attention 

While a large segment of the borrowers who were under the extended moratoria have seen their cash flows being restored to a larger extent, banks sense another 10 to 20 percent of customers might still find it challenging to restart repaying their loans, according to a top Central Bank official. 

At the onset of the pandemic last year, the Central Bank granted payment holidays for a broad section of loans for six months ended in September before extending that by a further six months up to March 31, 2021 to help businesses to get rid of the pandemic related disruptions.

In their latest round of relief since April 1, 2021, the Central Bank gave additional six months for borrowers in the passenger transport and tourism sectors who need more time to return to normalcy as they are still reeling from the lingering pandemic effects.  

But a large swath of businesses are now returning to normalcy with the virus scare on its way out, and people are venturing out much freely splurging on things which were put off by a year, generating higher cash flows for businesses.

“What we see is the re-emergence of business along with the expiry of the moratoria except in few sectors,” said Central Bank Deputy Governor T.M.J.Y.P. Fernando. 

“What the banks say is that they expect there could be some problems in 10 to 20 percent of loans,” which are coming out of the moratoria that expired on March 31, 2021. Fernando said this section of the borrowers might require special attention before they return to normalcy. 

In the case of this section of customers, banks can talk to them one-to-one to offer further relief in their own accord by way of re-scheduling their loans without direct involvement from the Central Bank. 

In a positive sign, banks saw their loans under moratoria falling to around 20 percent by the end of December 2020 from around 50 percent. 

For instance, Commercial Bank of Ceylon PLC said their loans under moratoria fell to 16 percent by December from 35 percent by the end of June 2020. Meanwhile, at National Development Bank PLC, such loans fell to 26 percent by December from 40 percent in June.