Regulatory Alerts2020-09-30 | Circular No.09 of 2020Extension of Debt Moratorium for COVID-19 Affected Tourism Businesses and Individuals
The Central Bank of Sri Lanka issued this circular requiring licensed finance and specialized leasing companies to extend a six-month debt moratorium for COVID-19 affected tourism businesses and individuals, covering capital and interest payments from 1 October 2020 to 31 March 2021. Eligible borrowers must submit requests by 25 October 2020, allowing institutions to convert due amounts into term loans recoverable from July 2021 while waiving penal interest and capping annual rates at 11.5 percent. Non-Bank Financial Institutions must finalize new agreements by 30 November 2020 and submit monthly reports to the Department of Supervision detailing all granted or denied moratorium applications.
[Logo of Central Bank of Sri Lanka]
MONETARY BOARD CENTRAL BANK OF SRI LANKA CIRCULAR
30 September 2020 | No. 09 of 2020
EXTENSION OF DEBT MORATORIUM FOR COVID-19 AFFECTED BUSINESSES AND INDIVIDUALS IN THE TOURISM INDUSTRY
With a view to meeting the challenges faced by the tourism industry due to the Easter Sunday Attack and the outbreak of COVID-19, the Central Bank of Sri Lanka (CBSL) has implemented debt moratorium schemes since April 2019. Considering the ongoing travel restrictions, disruption to economic activities and representations made by the Ministry of Tourism and related agencies, CBSL requests licensed finance companies and specialised leasing companies (hereinafter referred to as Non-Bank Financial Institutions (NBFIs), to provide a debt moratorium to COVID-19 affected businesses and individuals in the tourism sector (hereinafter referred to as the Scheme) for a further period of six months commencing from 1 October 2020 to 31 March 2021. CBSL observed that the proposed Scheme may not cause an undue level of stress or threaten the stability of the NBFI sector considering the lower level of exposure to the tourism sector by NBFI sector and measures proposed by the Ministry of Tourism to revive the tourism industry. Accordingly, this Circular is issued to give effect to the Scheme in a consistent manner across all NBFIs. However, NBFIs may offer any additional concessions to borrowers in a way that the overall benefits to borrowers are not less than the benefits offered under this Circular.
1. General Terms and Conditions
(i) Eligible borrowers
(a) Businesses and individuals who are affected by COVID-19 and registered with: i) Ministry of Tourism ii) Sri Lanka Tourism Development Authority iii) Agencies under Sri Lanka Tourism Development Authority iv) Local Government Authorities such as Pradeshiya Sabha, Urban Council or Municipal Council. However, such businesses shall now register with the relevant institutions referred in i), ii) and iii) above v) Department of Cultural Affairs vi) The Hotels Association of Sri Lanka
(b) 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.
(ii) Credit facilities to be supported under this Scheme shall include all performing credit facilities as at 18 April 2019 or a later date, granted to eligible borrowers and non-performing loans re-structured under Circular No. 05 of 2020 issued on 27 March 2020.
(iii) Debt moratorium refers to moratorium for both capital and interest for a further period of six months commencing 1 October 2020 to 31 March 2021.
(iv) Eligible borrowers who wish to avail the moratorium shall make a request seeking such moratorium to the relevant NBFI on or before 25 October 2020 and NBFIs are required to finalize the terms and conditions and enter into new agreements with eligible borrowers before 30 November 2020.
(v) 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.
(vi) NBFIs shall accommodate such requests, considering the potential repayment capacity of the borrower.
(vii) The installment due on the interest free term loan (i.e. the interest accrued during the previous moratorium period i.e. from 01 April 2020 to 30 September 2020) as per the Explanatory Note No. 03 of 2020 and No. 04 of 2020, may be recovered from the eligible borrowers commencing from 01 April 2021, if customers make a such request.
2. Structuring the debt moratorium
(i) NBFIs shall convert the capital and interest falling due during the moratorium period commencing from 1 October 2020 to 31 March 2021 into a term loan.
(ii) Such converted loan shall be recovered from eligible borrowers not earlier than 1 July 2021 onwards.
(iii) NBFIs may charge an interest rate for the converted loan, not exceeding the latest auction rate for 364-days Treasury Bills, available as at 1 April 2021, plus 5.5 per cent per annum and shall not exceed 11.5 percent per annum.
(iv) 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 NBFI wishes to offer a longer period, NBFIs may facilitate such requests. NBFI and the borrower shall agree on the interest rate, if the repayment period varies from the stipulated two-years period.
(v) NBFIs shall 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.
3. Reporting Requirement
NBFIs shall report the details of moratorium availed by borrowers to the Director of Department of Supervision of Non-Bank Financial Institutions as at 30th of each month, within 15 working days commencing from 1 December 2020. A reporting format is given at Annex I & II.
4. Revocations
Circular No 07 of 2020 dated 16 July 2020 on Relief Measures to Assist COVID-19 Affected Businesses and Individuals is hereby revoked.
(Signed) Prof. W D Lakshman Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka
Annex I
Circular No 09 of 2020 Details of Borrowers Availing Concessions Granted to Tourism Industry Applied/Granted Contracts
Name of LFC/SLC: .................... as at end of: ....................
| Serial Number | Name of the Borrower | Contract No. | Amount Outstanding at the time of granting the moratorium (Rs. '000) | Amount Considered for Moratorium (Rs. '000) | Number of Moratorium period granted from 18.04.2019 | Total Parked of Moratorium (months) | Total Amount Considered for Moratorium (Rs. '000) | Repayment period (Months) | Interest rate (%) | New term facility for the interest accrual under the Circular No. 04 of 2020 | New term facility for the interest accrual under the Circular No. 09 of 2020 | Status of the Moratorium (pending approval/granted) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Columns 5,7,9 : The total outstanding amount of beneficiaries delivered Column 10 : Provide the number 1,2 or 3 times Column 11 : It comprise the total of moratorium granted from 18.04.2019
Please e-mail to snbfid@cbsl.lk by 15th of the succeeding month.
Annex II
Circular No 09 of 2020 Details of Borrowers Availing Concessions Granted to Tourism Industry Denied Contracts
Name of LFC/SLC: .................... as at end of: ....................
| Serial Number | Contract Number | Name of the Borrower | Amount Outstanding at the time of applying for the moratorium (Rs. '000) | Reasons for not granting the Moratorium | Remarks |
|---|---|---|---|---|---|
Please e-mail to snbfid@cbsl.lk by 15th of the succeeding month.