July 01, Colombo (LNW): The Sri Lankan government is preparing to initiate talks with financial institutions and key stakeholders following growing unease over the renewed enforcement of the Parate law, according to Deputy Minister of Economic Development Dr Anil Jayantha Fernando.
The discussions, aimed at identifying a workable path forward, are expected to commence within the next few days.
The Parate law, which legally empowers banks to repossess mortgaged property without court intervention when borrowers default on loans, was reinstated as of midnight on June 30. Its return has ignited widespread concern amongst small and medium-scale entrepreneurs, many of whom fear that aggressive enforcement could trigger a wave of bankruptcies and force numerous local businesses to shut their doors.
Previously, the government had temporarily halted the application of the law, granting borrowers a three-month reprieve. An earlier moratorium under former President Ranil Wickremesinghe had extended the suspension for six months. These pauses were welcomed by business owners struggling with financial strain in a challenging economic climate.
With the reactivation of the law now in effect, business leaders are calling on the authorities to reconsider. Many within the SME sector are urging the government to extend the suspension for a further twelve months, arguing that many enterprises are still in recovery mode after years of economic instability and external shocks.
Responding to these concerns, Dr Fernando stated that the administration is committed to finding a “sustainable and fair” solution that considers both the financial system’s stability and the survival of local industries. He acknowledged the delicate balance between ensuring banks’ ability to recover loans and protecting struggling businesses from potential collapse.
