31 August 2020 09:15 am
Considering the protracted disruptions to the tourism sector from the coronavirus pandemic and the resulting travel restrictions, the Central Bank has decided to afford the moratorium on loans to tourism sector entities and individuals engaged in the industry in different capacities, for a further six months starting from October 1, 2020.
Hence, the moratorium on capital and interest currently in effect till end-September on the tourism sector loans is now effectively been extended till March 31, 2021 with the Central Bank last week issuing a circular to this effect delivering the largest and the longest relief extended to a single sector with such relief going back as far as the Easter Sunday attacks in 2019.
On March 27, in the early days of the pandemic, the Central Bank issued an all-inclusive circular covering the tourism sector with instructions to grant a six-month moratorium till September 30, 2020.
Last week’s circular effectively rescinded the circular issued on July 16, which extended the moratorium on capital outstanding of leasing facilities granted to the tourism sector related vehicles, to 12 months from earlier 6 months.
Central Bank said the proposed relief scheme will not cause an undue level of stress or threaten the stability of the banking system considering the lower level of exposure to the tourism sector by licensed banks, the capital buffers maintained by licensed banks and measures proposed by the Tourism Ministry to revive the tourism industry.
Further, in the latest circular, the Central Bank has also given instructions to licensed banks to convert the capital and interest falling due during the moratorium period and amalgamate it with the two components of the loans subjected to the moratorium for the earlier six months, from April 1, 2020 to September 30, 2020, for deferred recovery, commencing not earlier than July 1, 2021.
Such converted loans will be charged at an interest rate not exceeding the one-year Treasury bill rate at the primary market auction available by April 1, 2021, plus one percentage point.
Currently the one-year Treasury bill rate is at 4.89 percent.
The borrower will also have a minimum of two-year period for repayment. “However, if the borrower wishes to repay the loan in less than two years or if the licensed bank wishes to offer a longer period, licensed banks may facilitate such requests. Licensed bank and the borrower shall agree on the interest rate, if the repayment period varies from the stipulated two-year period”, the Central Bank said.
Nevertheless, this conversion of loans for the two moratorium periods should not take loans under the equal monthly installment (EMI) into consideration, of which the interest rates are already capped at 7 percent per annum, the Central Bank said.
Earlier, the Central Bank capped the interest rate at 7 percent on deferred installments of the loans that were subject to the moratorium after the banking chiefs made representations to the regulator on the matter.
Further, charging for EMI loans at 7 percent could be resumed only at the end of the extended remaining tenor of the loan, and not at the end of the moratorium period.
Further, the licensed banks will also, “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,” the circular added.
Businesses and the individuals affected by pandemic related disruptions and registered with the Tourism Ministry, Sri Lanka Tourism Development Authority (SLTDA), other agencies under the SLTDA, local government authorities such as Pradeshiya Sabha, Urban Council or Municipal Council, Department of Cultural Affaires and The Hotels’ Association of Sri Lanka, can request a moratorium from their banks on or before September 25, 2020.
In the case of sector employees who seek the relief under the moratorium, registration of their business or the employers with any of the above institutions would be sufficient.
Businesses, which are not yet registered with the said institutions, were urged to register themselves before applying for the moratorium.