By: Isuru Parakrama
December 22, Colombo (LNW): The Central Bank of Sri Lanka (CBSL) has recently rolled out a set of comprehensive relief measures aimed at supporting Small and Medium Enterprises (SMEs) that have been significantly impacted by a series of crises, including the 2019 Easter Sunday attacks, the COVID-19 pandemic, and the exceptional macroeconomic challenges that have plagued the country in recent years.
These measures, developed in collaboration with the Sri Lanka Banks’ Association, align with the objectives of the Working Committee on Loan Recovery, under the Special Provisions Amendment Act No. 26 of 2024.
Under these newly introduced provisions, SMEs with loans that have turned into non-performing loans (NPLs) will have their repayment schedules restructured.
The adjustments will be based on the financial capability of the borrowers and the presentation of a viable business recovery plan that is deemed acceptable by the banks.
The CBSL has specified that all rescheduling agreements must be formalised by June 15, 2025.
For SMEs with outstanding loans, the CBSL has outlined a staggered repayment timetable:
- Enterprises with loan balances of less than Rs. 25 million will be expected to resume repayments by December 31, 2025.
- Those with loans between Rs. 25 million and Rs. 50 million must begin repayments by September 30, 2025.
- Businesses with loans exceeding Rs. 50 million are required to start repaying by June 30, 2025.
In an additional move to ease the burden on businesses, the CBSL has also introduced provisions for interest waivers on unpaid loan amounts that have accrued between April 2019 and December 15, 2024. The level of waiver depends on how quickly the interest is cleared:
- A 65 per cent waiver will be granted on loans ranging from Rs. 5 million to Rs. 10 million if the outstanding interest is paid within six months.
- A 50 per cent waiver applies for the same loan category if settled within a year.
- A 40 per cent waiver will be offered for repayments made within one to five years.
Furthermore, the CBSL has mandated that banks must not deny new loan applications solely based on adverse records in the Credit Information Bureau (CRIB), a decision likely aimed at providing a lifeline to SMEs struggling with their financial history due to the challenging past few years.
In cases where relief is denied to borrowers, the banks are required to provide a clear explanation for the refusal. Borrowers will also be given the opportunity to appeal the decision to the Director of the Financial Consumer Relations Department at the CBSL.
These relief measures apply specifically to SMEs whose loans became Stage 3 non-performing loans after April 1, 2019. To qualify for the relief, businesses must engage with their respective banks’ Business Revival Units by March 31, 2025, and submit the necessary documentation to demonstrate their eligibility.
