In another bid to attract the much needed foreign exchange to the country, the country’s Central Bank is considering to extend the regulatory exemptions given to banks for borrowing from foreign sources which lapsed on December 31, 2015, Mirror Business learns. This is in line with the proposal made by the Finance Minister, Ravi Karunanayake in his 2016 budget proposal to encourage local companies to borrow internationally. However, he said the borrowing companies should bear the exchange risk. “Since there is a proposal to that effect in this year’s budget (2016), as the regulator we will have to provide the necessary legal framework for the banks and other companies,” said Central Bank Deputy Governor, Dr. Nandalal Weerasinghe.
Originally, under the last regime, the budget 2013 proposed to permit all licensed commercial banks (LCBs) and corporate entities to borrow up to US $ 50 million and US $ 10 million, respectively, per annum for three years without the approval from the Exchange Control Department. This followed a circular issued to all LCBs by the Central Bank on April 17, 2013 exempting such borrowing for a period of three years from the maximum 15 percent of capital funds of a bank. On December 31, 2015, however both of the above exemptions lapsed requiring borrowers – banks or otherwise – to seek approval from the Central Bank whenever they want to borrow in foreign currency.