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Consent Required for Seizure of Vehicles by Banks and Leasing Companies in Case of Non-Payment

In a recent address to the Parliament, State Finance Minister Dr. Ranjith Siyambalapitiya clarified the regulations surrounding the seizure of vehicles by banks and leasing companies due to non-payment of dues. The Minister emphasized that such seizures can only occur with the explicit consent of the current owner of the vehicle.

Addressing concerns related to defaulted installment payments, Minister Siyambalapitiya underscored that vehicles are not subject to seizure under the Parate law. He made these statements during a parliamentary session, shedding light on the intricacies of the Parate law.

Minister Siyambalapitiya elaborated that the power of Parate enables a bank or financial institution to seize property solely if the corresponding loan amount surpasses Rs. 5 million. He stressed the importance of this threshold, which serves as a safeguard against undue property seizures.

Drawing attention to the financial landscape, the State Minister revealed that the percentage of non-performing loans within banks has escalated from 4.8 percent in January 2021 to a concerning 13.4 percent by June 2023. He deemed this situation as highly significant and cautioned against relinquishing Parate powers, as it significantly curtails a bank’s ability to recover debts. Such a reduction in recovery potential heightens the risk of bankruptcy due to the amplified credit risk.

However, Minister Siyambalapitiya clarified that property seizure through Parate powers is pursued as a last resort when other avenues for debt recovery have been exhausted. The banks follow a structured internal process, which may involve measures like loan rescheduling and debt restructuring before resorting to such actions. The Minister emphasized that Parate-driven property seizure primarily targets deliberate loan defaulters and entrepreneurs unable to revive their businesses.

Highlighting recent statistics, Minister Siyambalapitiya revealed that the Parate law had been implemented by 19 banks and financial institutions on 173 occasions between January and June of the current year. These actions were taken in relation to loans amounting to a total of Rs. 15 billion, signifying the significant role of Parate powers in debt recovery efforts.

In conclusion, Minister Siyambalapitiya’s address outlined the careful and measured utilization of Parate powers in seizing property for debt recovery, underlining the importance of striking a balance between creditor rights and borrower protection.

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