Fiscal and Financial Concessions given by CBSL to face COVID 19 in SL

COVID 19 pandemic has become the biggest challenge to the world economy as well as to the human civilization in the recent past. Due to this virus , day by day countries getting collapsed due to strict measures taken by each and every government to control the pandemic situation. 

Compared to most of the developed countries, Sri Lanka has able to control the situation up to now.

As per the economists and IMF , this will be the biggest World Economic Downfall which we are going to face after many decades.

Thus after understanding this situation, On 27th March 2020 Central Bank of Sri Lanka (CBSL) issued a Circular to set up a Six Month Re-Finance Facility amounting to Rs.50 Bn to support COVID-19 affected Businesses including Self Employment and Individuals.

CBSL issued this circular after decision taken by the Cabinet of Ministers on 20th March 2020 to introduce difference fiscal and financial concessions.

You can watch following video also for easy reference.

1. Financing Support under special COVID-19 Refinance Scheme of CBSL

First of all we will discuss on the Working Capital Loan Proposed  by CBSL. I will discuss the summary rather than giving you a Essay to read.

What is the proposed interest rate as per CBSL ?

Interest Rate - 4% p.a

Concession will be given to public through following Financial Institutions.

• Licensed commercial banks

• Licensed specialized banks

• Licensed finance companies

• Specialized leasing companies

Following Businesses and Sectors will be Eligible for the facilities

i. Tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers that have been adversely affected by work disruption and overseas lockdowns due to COVID – 19.

ii. Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorized domestic pharmaceutical suppliers with turnover below Rs. 1 bn.

iii. Self-employment businesses and individuals who have lost their jobs or income due to COVID-19.

iv. Foreign currency earners (individuals and corporates) who have to repay loans in foreign currency and whose incomes/ businesses have been adversely affected due to COVID-19.

However the Circular explicitly says that following are excluded for the concession

Import facilities other than pharmaceutical drugs, medical equipment, food, fertilizer and essential raw materials and machinery and equipment.

What are the credit facilities offered under this concession ?

1. Term loans

2. Leasing facilities

3. Pawning

4. Overdrafts

5. Trade finance facilities (Denominated in Rupees and foreign currency)

How to apply for these facilities

* You can make a request online using any other communication arrangement.

* However deadline is 30th April 2020.

*As per the circular, Upon receipt of such a request , Finance institutions should process such requests from 45 days from the date of such receipts.

2. Debt Moratorium (Capital and Interest) 

(A) What are the concessions given by CBSL  for existing Performing Loans

If you are a performing customer ( Good customer who has being paying installments without significant days in arrears ) , Following concessions can be obtained.

Moratorium means - a legal concession to postpone payments (Delay only not to waive-off )

1. Six months Moratorium - For leases facilities obtained for all three-wheeler, school vans, lorries, small goods transport vehicles and buses, and related assets such as motor bikes ans taxies operated by the self-employed/ owners.

2. Moratorium until 30th May 2020 - On personal loans granted to all private sector non-executive employees.

3. Three month Moratorium - for all personal loans and leasing rentals of value less than Rs. 1 million.

4. Six months Moratorium - for affected industries in small & medium enterprises, tourism, apparel, plantation, IT and related logistic service providers.

5. Six months Moratorium - for all other eligible businesses/sectors specified below.

i. Tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers that have been adversely affected by work disruption and overseas lockdowns due to COVID – 19. 

ii. Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorized domestic pharmaceutical suppliers with turnover below Rs. 1 bn. 

iii. Self-employment businesses and individuals who have lost their jobs or income due to COVID-19. 

iv. Foreign currency earners (individuals and corporates) who have to repay loans in foreign currency and whose incomes/ businesses have been adversely affected due to COVID-19.

6. Extended up to 30th Sep 2020 at 13% Interest rate - Permanent Overdraft facilities falling due for settlement or maturing or are reviewed during the period up to 25th March 2020.

7. Extended by two months at 13% interest rate - Temporary Overdraft facilities as at 25th March 2020.

8. Extended up to 30th Sep 2020 - Eligible trade finance facilities falling due for settlement or maturing or were under review during the period up to 25th March 2020.
  

9. Extended up to 30th Sep 2020 - Pawing facilities falling due for settlement or maturing during the period up to 25th March 2020.

10. Charges on Cheque returns and stop payments will be discontinued.

11. Late payment fee on all credit cards and other credit facilities during the period up to 30th Sep 2020. Licensed banks shall extend the validity period of cheques valued less than Rs. 500,000 until 30th April 2020.

12. Maximum interest rate of 15% on local credit card transactions of value up to Rs. 50,000

13. The minimum monthly payment on credit cards shall be reduced by 50%; and repayment of all credit cards below the limit of Rs. 50,000 to be extended until 30th April 2020.

(B) What are the concessions given by CBSL  for existing Non-Performing Loans

If you are a Naughty Boy (NPL customer as at 25th March 2020) , its your time. CBSL has given following concessions on you also.

1.  Penal Interest charged upto 25th March 2020 will be waived-Off.

2. Methodology of Rescheduling of loans and advances has been changed  

3. Suspension of recovery actions

3. Working Capital and Investment Loans ( Under the same COVID -19 Refinance Scheme) 

Finance companies are requested to grant additional rupee loans for above two purposes.

Please note that for following loans, loan amount will be based on the Funding Requirement of the borrower. 

Further Financials Institutions will request suitable collateral to mitigate risk. 

Working Capital Loans - From Banks and Financial Institutions

• Eligible for - Performing and non-performing borrowers

• Interest rate - 4% p.a

• Limit - Rs. 25 million per bank per borrower and Rs. 10 million per other financial institutions per borrower or 2 months working capital requirement whichever is higher, based on the requirement for working capital cycle.

• Repayment Period - 2 years (moratorium period 25th March 20 - 30th Sep 20)

• Credible business plan  - Required

Investment Loans - From Banks and Financial Institutions

• Eligible for - Performing borrowers

• Interest rate - Maximum of Average Weighted Prime Lending Rate plus 1.5%.

• Limit - Rs. 300 million per bank per borrower to expand business activities.

• Repayment Period - 5 years (moratorium period 25th March 20 - 30th Sep 20)


• Credible business plan - Required

4. CRIB related Concessions

1. Financial institutions are requested not to decline loan applications solely based on an adverse CRIB records.

2. CRIB will develop a methodology to capture above mentioned Moratoriums are not affecting Credit Score of a Borrower.

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References and Sources used to Write the Article

Central Bank of Sri Lanka Circular No.05 of 2020 issued on 27th March 2020.

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Article Written By : H.Harshana Sameeraka (Bsc Accounting (Special) First Class (Gold Medal Winner- Higest GPA), CA Passed Finalist with pending Viva (Prize Winner), CIMA SCS, Project Manager KPMG Sri Lanka)
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