Credit flows to the tea sector are expected to increase over the next few weeks, after the latest round of talks with banks.
“Factories should be able to get working capital loans very soon. Already DFCC Bank has released a few loans and a few more are in the pipeline. Other banks will also follow,” Chairman of the Sri Lanka Tea Board, Lalith Hettiarachchi told The Sunday Times FT.
Under the government aid package, tea factories hit by the global financial crisis last year, were promised a 6% interest rate subsidy on working capital loans.
The Treasury also guaranteed the full loan amounts, to facilitate credit flows into the sector. However, banks were unwilling to lend without collateral. The tea sector says it urgently needs a credit injection of nearly Rs 4 billion, to sustain itself through the current downturn.
This week at a meeting chaired by Senior Adviser to the President, Basil Rajapaksa, and attended by the Secretary to the Treasury, the government took further steps to unblock credit flows.
“The Treasury agreed to give a letter of guarantee individually to all the banks. Each bank giving a loan can ask for a letter individually, based on this offer. Also the loan recovery period was extended from two years to five years. So although the government guarantee on the loans is limited to two years, factories have up to five years to pay back,” said Mr Hettiarachchi.
State banks are also reducing interest rates on loans to specific sectors and private banks are expected to follow. |
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