Draft legislation to suspend parate rights of banks receives nod

Despite repeated warnings by banks, the Cabinet approved the draft Recovery of Loans By Banks (Special Provisions) (Amended) Act to suspend parate rights of banks until 15th of December this year.
President Ranil Wickramasinghe in his capacity as the Minister of Finance, Economic Stability and National Policies presented the draft bill for the approval of the Cabinet of Ministers this week after securing the clearance of the Attorney General.
Accordingly, the bill is to be published on Government Gazette and would be tabled in the parliament for approval.

The Cabinet of Ministers late last month decided to revise Recovery of Loans by Banks (Special Provisions) Act No.4 of 1990 in order to suspend the parate rights of banks.
However, the Cabinet Spokesperson Minister Bandula Gunawardana noted that debt recovery actions under the courts would continue. Meanwhile, the Sri Lanka Banks’ Association (SLBA) on Monday warned that suspension of parate execution may cause extended delays in recovery of funds, placing the public deposits at risk. 
While ‘parate’ execution provision is only one option available to the banks in the debt recovery process, they pointed it mitigates the impact of the delays in the process.

As reported by our sister paper the Daily FT in the ‘Economics Matter’ column by W. A. Wijewardena quoting ex-banker Dr. Anil Priyanka Baddevithana, suspending parate execution will not help the MSME sector to come out of the present economic crisis, but rather it will set a bad precedent too. 
According to Dr. Baddevithana, who has experience in addressing the issue of non-performing small loans, while maintaining the safety of the funds provided by depositors, the permanent solution comes from a joint effort by banks, the government, and the Central Bank by taking over these bad assets and rehabilitating them.