Bank borrowers can benefit from new Credit Guarantee Scheme for Pawning Advances

Several banks have already signed the agreements with the Central Bank (CB) of Sri Lanka for the new credit guarantee scheme for pawning advances introduced on June 17, the CB said in a statement this week.

The scheme is being implemented and monitored by the CB’s Regional Development Department and is expected to increase significantly the present level of credit under pawning.

Licensed commercial banks and licensed specialised banks engaged in pawning activities can now provide an enhanced level of credit to their customers by joining this newly introduced credit guarantee scheme.

“This credit guarantee scheme will support farmers, small business owners and small and medium entrepreneurs who use pawning advances for their economic and business activities. New scheme permits the borrowers to receive additional 15 per cent of the current level of Loan to Value Ratio provided by the banks. A cap on the rate of interest applicable to pawning advances has also been imposed to provide further relief to the borrowers,” the CB said.Credit obtained through pawning has significantly declined due to a drop in gold prices in the international market in the recent past. “Hence, through this scheme, it is expected to support the banks to increase their Loan to Value Ratio. Under this scheme, borrowers are eligible to obtain pawning advances up to Rs. 500,000 at an interest rate of 15 per cent per annum which includes all fees and charges. The enhanced level of credit ensured by this scheme, will help borrowers of pawning advances to meet their financial requirements comfortably particularly in the agricultural and business activities,” the CB statement said.