Sri Lanka’s banks agree to provide credit support for SMEs
All Sri Lanka’s licensed banks have agreed to provide a special Credit Support Scheme to eligible Small and Medium Enterprise (SME) borrowers by way of suspending capital repayment for one year in accordance with the guidelines issued by the Central Bank (CB).
The aim is to complement the fiscal incentives already announced by the Government for SMEs as an immediate relief to accelerate economic growth in major sectors, the CB announced on Monday.
Licensed banks will defer auctioning of assets until 31.12.2020 and suspend legal action against non-performing borrowers who are participants of this scheme.
These banks are expected to have a mechanism not to decline loan applications solely based on an adverse record at the Credit Information Bureau of Sri Lanka (CRIB).
SMEs with an annual turnover between Rs. 16 million to Rs. 750 million for the year ended 31.12.2019 that have obtained credit facilities from licensed banks are eligible to participate in this scheme.
In the case of SMEs, which are in the NonPerforming Loans (NPLs) category as at 31.12.2019, the lower limit of annual turnover of Rs. 16 million will not apply under this scheme. SMEs operating in manufacturing, services, agriculture (including processing) and construction sectors and have obtained business related term loans, leasing facilities, overdrafts and trade finance facilities denominated in Rupees are eligible under this scheme, subject to certain requirements.
In the case of SMEs which are in the NPL category as at 31.12.2019, the business sectors supported under this scheme shall also include value addition businesses and trading. Eligible borrowers are required to make a written request to respective licensed banks to avail of this scheme on or before 10.02.2020.
Participants of this scheme shall continue to service the interest due on credit facilities considered under this scheme in a timely manner. Those who fail to service interest will not be entitled to enjoy the benefits of this scheme, CB circular stipulated.
Eligible borrowers with aggregate outstanding exposure up to Rs. 300 million as at 31.12.2019 with a licensed bank will be eligible to the capital moratorium during 01.01.2020 to 31.12.2020, from such licensed bank.
Permanent overdraft facilities falling due or maturing or under review during the period up to 31.03.2020 will be extended up to 30.06.2020, by the licensed bank.
In the case of Temporary Overdraft facilities as at 31.12.2019, the expiry of Temporary Overdraft limits will be extended by two months. Eligible trade finance facilities falling due or maturing or under review during the period up to 31.03.2020 will be extended by 30 days. An additional loan or a new loan facility not exceeding Rs. 300 million may be provided by a licensed bank, for investment or working capital purposes, with a maximum grace period of one year, subject to certain conditions. However, the borrower needs to submit a credible business plan.
Concessions already granted under different relief schemes and which are due to expire before 31.12.2020, will be extended up to 31.12.2020. However, such borrowers shall be required to comply with the requirements of this scheme. Licensed banks may consider granting concessions to borrowers whose total borrowings exceed Rs. 300 million, on a case-by-case basis.