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Friday May 17, 2024
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The Central Bank has expanded the debt moratorium extension to customers of leasing and finance companies. It said the expansion followed the receipt of many requests from concerned parties and Government authorities to extend the concessions granted to the borrowers affected by the continuation of the outbreak of the COVID-19 pandemic in Sri Lanka.
To facilitate meeting the challenges faced by businesses and individuals, CBSL has requested Licensed Finance Companies and Specialised Leasing Companies (Non-Bank Financial Institutions – NBFIs), to extend concessions to COVID-19 affected businesses and individuals.
The eligible borrowers of transportation and tourism sectors, who have availed concessions under previous schemes, are also eligible to obtain relief under the latest initiative.
Eligible borrowers opting for concessions have been offered three options. They are:
(i) Option 1: Restructuring of credit facilities
(a) NBFls shall restructure the existing credit facilities (performing and nonperforming as of 1 October) over a longer period, considering the repayment capacity of the borrower and an acceptable revival plan agreed by both parties.
(b) The interest rate applicable shall be the original contractual interest rate minus 3% per annum, subject to a floor of 11.5% per annum and cap of 15% per annum.
(c) A minimum of three months grace period shall be granted to commence repaying capital portion of the instalment as per restructured terms.
(d) NBFIs may aggregate the amounts fallen due during the previous moratorium schemes (i.e., capital, interest and additional accumulated concessionary interest during the moratorium period) with the balance capital outstanding at the time of restructuring.
(e) Any additional interest charged on inability to repay the instalment as per agreed terms, shall not exceed 2% per annum and be charged only on the amount in arrears.
(f) NBFIs shall waive off penal interest accrued or charged during the period 1 April to 30 September.
(ii) Option 2: Facilitating early settlement
If an eligible borrower is willing to settle the existing credit facilities on or before 31 March 2022, NBFIs shall fully waive off future interest, fees and applicable charges.
(iii) Option 3: Extending the moratorium for performing credit facilities as of 1 October
(a) NBFIs shall defer recovery of capital, interest, or both up to 31 March 2022.
(b) NBFIs shall convert the capital and interest falling due during the moratorium period into a term loan.
(c) NBFIs shall aggregate the amounts fallen due during the previous moratorium schemes (i.e., capital, interest and additional accumulated concessionary interest during the moratorium period) and the term loan referred to earlier into a new loan.
(d) NBFIs may charge an interest rate on the new loan, not exceeding 11.5% per annum.
(e) NBFIs may commence recovery of new loan referred to in 2.1(iii)(c) above commencing from 1 July 2022 with a minimum repayment period of 12 months.
(f) The borrower shall commence the repayment of the original loan instalment from 1 April 2022.
(g) NBFIs shall extend the due dates of revolving credit facilities up to 31 March 2022, if such due dates fall from 1 October to 31 March 2022.
(h) Penal interest shall not be accrued or charged during the moratorium period.
NBFIs shall suspend all types of recovery actions against credit facilities of eligible borrowers until 31 March 2022, provided that such facilities have been classified as non-performing on or after 1 April 2020 and the respective borrowers are not in a position to continue/immediately start repayment of loans due to the disruption to their normal income-earning activities.
CBSL said NBFIs can offer additional concessions than given in this scheme to affected businesses and individuals, on their request. The latest directive has been issued to provide concessions in a consistent manner to all affected borrowers of NBFIs, with a view to easing the burden on the borrowers of NBFIs to duly repay their loans.
A borrower of NBFI, who faces financial difficulties, such as loss or reduction of income/salaries or sales, closure of business or loss of employment, etc., due to COVID-19 would be eligible to receive these concessions.
CBSL said eligible borrowers who are opting for concessions under Option 1 and Option 3 should apply for concessions on or before 1 November 2021 in writing or through electronic means.
NBFIs are required to expeditiously communicate the concessions, deadline, and application format for submission to all eligible borrowers via printed and/or electronic means including e-mail and SMS.
NBFIs should accept any request submitted after 1 November, if the reasons for delay in making such request is acceptable. Furthermore, NBFIs should ensure that the borrowers are made aware of the structure of the moratorium or restructuring of credit facilities prior to approval.
In the case of declined requests, NBFIs shall inform the borrower in writing or through electronic means and clearly mention the reasons for rejection.
NBFIs are also required to educate the borrowers on the option to appeal against such rejection to the Central Bank Financial Consumer Relations Department (FCRD) Director, requesting a review.
