- New credit schemes in addition to Rs.50 b refinance facility
- Total of Rs. 27.5 b under refinancing scheme already disbursed
- Fresh roll-out to meet ceiling increase of Rs. 100 b by Cabinet two weeks ago
- Govt. guarantees for construction sector to borrow from banks
The Central Bank on Monday said it will roll out new credit schemes that could be as much as Rs. 100 billion to provide commercial banks with concessionary funds to lend to businesses at 4% interest to revive the economy.
The announcement came after President Gotabaya Rajapaksa took Central Bank officials to task over what he termed as lack of effort to support the economy to recover from the COVID-19 crisis. Two weeks ago, the Cabinet approved extending the Rs. 50 billion refinancing facility to Rs. 150 billion, which the Central Bank in a statement said will be done through the new credit schemes.
“Growth of the Sri Lankan economy has fallen to dismal levels over the past few years, and the impact of the COVID-19 pandemic may result in severe stress on economic and financial system stability in the period ahead unless immediate remedial actions are taken,” the Central Bank said in a statement that was released late on Monday night.
In this context, in support of the Government’s efforts to revive the economy, the Monetary Board of the Central Bank of Sri Lanka at its meeting held on 16 June decided to introduce new credit schemes under the Section 83 of the Monetary Law Act No. 58 of 1949.
“Accordingly, in addition to the already disbursed Rs. 27.5 billion under the refinance scheme introduced on 27 March, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1% against the pledge of a broad spectrum of collateral, on the condition that LCBs in turn will on-lend to domestic businesses at 4%, while ensuring the greatest possible distribution of this facility,” the statement added.
“This scheme along with the existing refinance Scheme will provide Rs. 150 billion in total to the businesses affected by the COVID-19 pandemic.”
In addition, the construction sector enterprises will be provided with a facility to borrow from LCBs, using guarantees issued by the Government equivalent to the amount due on account of contracts carried out in the past, under a new dedicated credit scheme funded by the Central Bank and made available at the aforementioned concessionary rates.
Operating instructions on these new credit schemes will be issued in immediate due course, the Central Bank said.