Most Sri Lanka Covid-19 moratorium debt recovering, about 20-pct under stress: regulator


A majority of borrowers given in Sri Lanka given a debt under moratorium given as relief during the Coronavirus have begun repayments, but a portion of them appear to be in difficulties Deputy Central Bank Governor Yvette Fernando said.

“About 10 to 20 percent of loans under the moratorium are facing difficulties whereas the rest have started settling,” Yvette Fernando told reporters in Colombo.

“Therefore, banks might have to negotiate and extend the time given for these 10 to 20 percent who faces difficulties in settling.”

Sri Lanka gave a moratorium for Coronavirus relief until October 2020. It was then extended for another six months.

In August 2020 a central bank report said about 25 percent of total private sector credit was under moratorium. Some banks have said in some cases up to a third of their loan books were under moratorium.

By August private sector credit from commercial banks were about 5.8 billion rupees.

By February 2021 credit had grown to 6,276 billion rupees, central bank provisional figures showed.

According to central bank data in the December 2020 quarter non-performing loans in the banking sector fell to 4.9 percent from 5.3 percent. At licensed specialized banks it was 6.9 percent down from 7.0 percent.

At commercial banks it was 4.7 percent in December down from 5.1 percent in the September quarter. However in Sri Lanka bad loans ratio tends to fall in the December quarter amid a spike in credit and rise in the first quarter.

“What we expected from the moratorium was the opportunity for the business owners to restructure their businesses and for them to shift businesses in order to remain relevant within the business environment by this time,” Fernando explained.

“We also expected businesses to manage costs and sacrifice certain things in order to reconstruct their businesses.

We have given some extended time for sectors like transportation and tourism.

Apart from the transportation and tourism sectors, which had been given an extension, other sectors have started to recover.”

Fernando also said that the Central Bank did not need to interfere with the loan rescheduling as it was a normal practice within banks as it was their responsibility.

“Normally a bank will reschedule the loans after communicating with the relevant borrowers, in a difficult situation like this,” she said.

Under the Coronavirus moratorium banks were also given regulatory relief in classification.


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