ECONOMYNEXT – Sri Lanka has developed a reduction package deal for small and medium enterprises in collaboration with the Central Financial institution of Sri Lanka (CBSL), the Sri Lanka Banks’ Affiliation (Assure) Ltd (SLBA), and SME sector representatives.
“The related measures have been ready with a long run perception to offer a respiration house for the affected SMEs whereas guaranteeing the soundness of the banking sector,” a authorities assertion stated.
The total assertion is reproduced under:
Reduction measures to help the affected Small and Medium-sized Enterprises
Small and Medium-sized Enterprises (SMEs) sector has been recognized as probably the most essential sector of strategic significance to re-orient the nation’s financial system contemplating the sectorial contribution to the financial system which is greater than 50% to the nation’s Gross Home Manufacturing.
However, the latest upheavals skilled by the nation throughout previous couple of years, following the 2019 Easter Sunday Assault, the COVID-19 pandemic, 2022 financial collapse and different exterior impacts, have severely affected the SMEs, hindering their capability considerably, grappling to conduct enterprise as traditional.
This affected their immediate reimbursement habits and led to take authorized actions by banks and risk of confiscation their securities/property by the banks resulting from default.
For the interval of 01.04.2019 to 30.09.2024, roughly 494,000 loans amounting to Rs. 886 Bn have been labeled as stage 3 loans (Non-performing Mortgage – NPL) within the banking trade.
It’s famous that 99% of variety of loans categorized below stage 3 are under Rs. 25 Mn.
Contemplating all of the components, a reduction package deal was designed by the federal government to help the SMEs who confronted difficulties in servicing their debt because of the adversarial affect skilled through the latest previous.
The reduction package deal was developed in collaboration with the Central Financial institution of Sri Lanka (CBSL), the Sri Lanka Banks’ Affiliation (Assure) Ltd. (SLBA), SME sector representatives, relevant authorities companies and the related measures have been ready with a long run perception to offer a respiration house for the affected SMEs whereas guaranteeing the soundness of the banking sector.
The SMEs which meet the under talked about standards are eligible to enter the proposed reduction package deal.
i. SME debtors obtained credit score services from a licensed financial institution which have been labeled as stage 3 (NPL) on or after 01.04.2019.
ii. SMEs which begin discussions with the respective Reduction Banking Unit on or earlier than 31.03.2025, topic to submission of all required paperwork.
(A) Particular reliefs
1. Particular reduction measures have been proposed below three classes primarily based on the mixture capital excellent of credit score services out there as of 15.12.2024 and every class is entitled to particular advantages that are proven within the Desk under.
(B) Basic reliefs
1. Suspension of Parate Execution till 31.03.2025 making room for SMEs to enter a revival plan by amending the Restoration Loans by Banks (Particular Provisions) Act No.4 of 1990.
2. If required, grant a working capital mortgage for eligible SMEs, topic to reimbursement capability and submission of credible enterprise revival plan on a case by case foundation to re-boost them to their pre-crisis working standing.
3. An adversarial ‘CRIB report’ shall not be the one motive for decline mortgage functions from eligible debtors below this.
4. Licensed banks in session with the Credit score Info Bureau of Sri Lanka might develop an acceptable reporting modality to report restructured credit score services below this reliefs.
5. SMEs on their request to be supplied with a breakdown of the capital, curiosity and different costs of their credit score services from their financial institution.
(C) Extra reduction measures
Along with the aforesaid particular and common reduction measures, the Ministry of Finance, Planning and Financial Growth has requested the CBSL to discover the likelihood to include the next extra reduction measures to the reduction package deal with a view to make sure the smoothimplementation and the utmost profit to the SME sector.
1. Introduction of an inexpensive rate of interest for restructured loans lower than Rs.50 Mn class topic to most of Common Weighted Prime Lending Fee (AWPR) plus (+) cheap margin (Ex: Most 2%).
2. Most mortgage reimbursement interval is 10 years (until unique settlement has supplied a interval longer than 10 years) topic to grievance dealing with course of for aggrieved events.
3. Rename ‘Enterprise Revival Items’ of the respective banks because the ‘Reduction Banking Items’.
4. Droop all authorized actions for instances through the proposed reduction interval i.e.12 months for loans lower than Rs. 25 Mn, 09 months for loans between Rs. 25 Mn and Rs. 50 Mn and 06 months for loans above Rs. 50 Mn, together with a whole freeze on authorized proceedings associated to NPL loans within the related classes, apart from dates already scheduled.
5. Set up a clear mechanism to grievance dealing with within the occasion of a dispute over the valuation for auctioning a property between banks and the defaulter which ensures the borrower’s property is auctioned on the highest attainable price to maximise its worth.
(D) Extra coverage measures to help SME sector
1. Set up an Advisory Committee for SMEs below the management of Ministry of Industries as a chief arm for SME coverage growth, to offer steerage and coordinate all of the related stakeholders’ work below completely different establishments for SME sector developments, gathering below one umbrella.
2. Introducing a scorecard/ranking mechanism in collaboration with the Institute of Chartered Accountants of Sri Lanka and different skilled accountant our bodies to help SMEs to extend their capacity to entry finance.
3. Offering backup help by providing credit score ensures for financial institution loans of SMEs assuaging collateral points in acquiring financial institution loans in collaboration with the Nationwide Credit score Assure Establishment Restricted (NCGIL) which is to be commenced its operation from January 2025. (Colombo/Jan16/2025)
