The Central Bank of Sri Lanka (CBSL) has decided to provide further relief measures to assist tourism sector businesses and individuals who are adversely affected by the prevailing COVID-19 outbreak.
Considering the ongoing travel restrictions, disruption to economic activities and representations made by the Ministry of Tourism and related agencies, CBSL has requested licensed commercial banks and licensed specialised banks to provide a debt moratorium to COVID-19 affected businesses and individuals in the tourism sector for a further period of six months commencing from 1 October 2020 to 31 March 2021.
CBSL has observed that the proposed extension may not cause an undue level of stress or threaten the stability of the banking system considering the lower level of exposure to the tourism sector by licensed banks, the capital buffers maintained by Licensed Banks and measures proposed by the Ministry of Tourism to revive the tourism industry.
Accordingly, CBSL has issued a circular to give effect to the extension. It also said licensed banks may offer any additional concessions to borrowers in a way that the overall benefits to borrowers are not less than the benefits offered under the Circular.
Eligible borrowers include businesses and individuals who are affected by COVID-19 and registered with; i) Ministry of Tourism, ii) Sri Lanka Tourism Development Authority, Agencies under Sri Lanka Tourism Development Authority, Local Government Authorities such as Pradeshiya Sabha, Urban Council or Municipal Council (such businesses shall now register with the relevant institutions referred in i), ii) and iii) above), v) Department of Cultural Affairs; and vi) The Hotels Association of Sri Lanka.
Employees of eligible businesses who are affected by COVID-19. In the case of such employees, the registration of the business with the relevant institutions referred in (a) above shall be considered sufficient.
Credit facilities to be supported under this Scheme will include all performing credit facilities as at 18 April 2019 or a later date, granted to eligible borrowers and non-performing loans restructured under Circular No. 05 of 2020 issued on 27 March.
Eligible borrowers who wish to avail the moratorium have been urged to make a request seeking the moratorium to the relevant licensed bank on or before 25 September. Any eligible borrower who has the capacity to service the loan repayment is expected to service such loan repayments instead of requesting for this extension. Licensed Banks shall accommodate such requests, considering the potential repayment capacity of the borrower.
Licensed Banks have been requested to convert the capital and interest falling due during the moratorium period commencing from 1 October 2020 to 31 March 2021 into a term loan. Licensed banks may amalgamate the capital and interest falling due during 1 April to 30 September with the capital and interest falling due during 1 October to 31 March 2021, except for EMI loans for which the interest rate for the moratorium period is capped at 7% cent per annum. Such converted loan shall be recovered not earlier than 1 July 2021 onwards.
Licenced banks may charge an interest rate for the converted loan, not exceeding the latest auction rate for 364-days Treasury Bills, available by 1 April 2021, plus 1% per annum.
The repayment period of such converted loan shall be minimum of two years. However, if the borrower wishes to repay the loan in less than two years or if the licensed bank wishes to offer a longer period, licensed banks may facilitate such requests. Licensed Bank and the borrower shall agree on the interest rate, if the repayment period varies from the stipulated two-year period.
Licensed banks have been requested to waive off the accrued and unpaid penal interest as at 1 October 2020, if any, on performing and non-performing loans considered under this Circular. Penal interest shall not be accrued and charged during the moratorium period.
Licensed banks have been requested to report the details of moratorium availed by borrowers to the Director of Bank Supervision as at 30th of each month, within 15 working days commencing from 1 November 2020. A reporting format will be issued in due course.