Sri Lanka’s President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, who is also finance minister had asked bank heads to offer a moratorium of up to 300 million rupees for small and medium borrowers, a government statement said Friday.
“The borrowers should continue to pay interest,” Cabraal said.
Formal directions are expected to be issued following discussion with banks and the central bank.
The moratorium is not only for loans that have gone bad.
“Borrowers who requests would be able to avail themselves of the moratorium,” Cabraal said.
You may also read:
Sri Lanka President, PM orders banks to halt recovery of loans up to Rs300mn
Sri Lanka troubled firms will get CRIB relief, 18-month debt freeze: Cabraal
Debt repayments including interest and principle are a key cash inflow for banks, in addition to raising new deposits for banks, raising concerns whether they would be forced to raise more deposits.
Asian markets mixed as dealers step back ahead of festive break
Sri Lanka rupee opens steady, banks stocks weaker[/size]
Sri Lanka awaits CB Governor decision[/size]
Foreign investors sell rupee bonds for third week[/size]
Sri Lanka coconut auction prices up 40-pct amid higher harvests[/size]
Cabraal said at the moment many banks were depositing excess liquidity in the central bank, and loan growth was weak.
Since the debt moratorium was only for one year, as soon as the economy picked up, debt repayments would resume he said.
Sri Lanka’s central bank placed deposit price controls soon after the rupee collapsed in an unprecedented intervention in the banking system, though the loss of potential deposits to banks and loss to consumption is not known.
Rating agencies warned at the time that the biggest hit from the sudden intervention was on the smallest banks.
The deposit price control has been lifted. The average weighted new deposit rate increased to 8.66 percent in October from 8.49 percent in September.
The average weighted new fixed deposit rate grew to 8.98 percent in October from 8.72 percent in September. (Colombo/Dec23/2019)