Licensed banks implement a credit support scheme for troubled SMEs
View(s):Sri Lanka’s licensed commercial banks and licensed specialised banks have agreed to provide a special credit support scheme to eligible Small and Medium Enterprise (SME) borrowers of respective licensed banks this year to complement the fiscal incentives already announced by the Government.
Based on the discussions the Central Bank (CB) had with the licensed banks, it is observed that the proposed scheme may not cause an undue level of stress or threaten the stability of the banking system.
The CB has issued a circular setting out the guidelines for giving effect to the scheme in a consistent manner across licensed banks.
This facility will be given to SMEs engaged in manufacturing, services, agriculture (including processing) and construction with an annual turnover between Rs. 16 million to Rs. 750 million for the year ended 31.12.2019.
During the period of the credit support scheme, borrowers will be required to continue to service the interest due on credit facilities considered under this scheme in a timely manner in accordance with the conditions applicable to this scheme.
This facility will cover performing loans of up to Rs. 300 million and non-performing loans while for loans over Rs. 300 million rupees, banks have been directed to consider it on a case-by-case basis, the CB said.
Credit for imports, other than machinery is not eligible for the scheme, the CB circular mentioned, adding that those wishing to avail of the facility should write to their banks before January 31.
Banks have been directed to provide the moratorium, even if the borrower has a poor CRIB record.
The Government has indicated its willingness to defer capital repayments on refinance loans granted to licensed banks falling due from 01.01.2020 until 31.12.2020 and extend the final repayment date by 12 months.
However, banks are required to seek such extension if required and enter into supplementary agreements with the relevant state agency in this regard.
For performing loans, banks have the discretion of giving a new 5-year loan with a 1-year grace period of up to Rs. 300 million per bank per borrower if a credible business plan is submitted, along with sufficient collateral.
For non-performing loans, penal interest rates accrued will be absorbed by banks, and the loans will be rescheduled to be repaid over twice the number of outstanding installments, following a 1-year grace period.
Non-performing customers may be given working capital loans to revive their business, with 75 percent of such loans guaranteed under a new credit guarantee scheme operated by the CB.
In instances where resolutions for recovery have already been passed, auctioning of assets will be deferred until 31.12.2020 in respect of such borrowers who are participants in the scheme and meet the requirements of the scheme.
(BS)