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Last Updated : 2024-04-29 15:40:00
23 February 2024 12:10 am - 19 - {{hitsCtrl.values.hits}}
Sri Lanka’s banking sector is on the edge of following the government’s decision to suspend parate execution rights. This move, seen as caving to pressure from debt evaders’ intense lobbying, is raising concerns about the sector’s ability to support economic recovery.
“The banks believe that this is an unnecessary intervention that will weaken the strength of banks to perform their role in supporting the economic sectors that will revive the country,” the Sri Lanka Banks Association (SLBA) told Mirror Business, while pointing out they are “alarmed” by the statement made by the State Minister of Finance, Ranjith Siyambalapitiya, in parliament this week.
The SLBA urged the government not to play into the delaying tactics of these borrowers.
“Banks observe commercial failure, personal misfortune, or downright fraudulent intent furthered by the connivance and complicity of borrowers and parties with influence to pervert the course of the law by delaying the conclusion of debt recovery action/litigation,” it said.
With non-performing loans in the sector at 13 percent, the SLBA stressed the critical need to liquidate non-viable commercial ventures belonging to distressed borrowers expeditiously.
Over the past month, approximately Rs. 38 billion has been recovered from 557 borrowers through the parate remedy, constituting around 0.4 percent of the total loans. The SLBA deemed this amount is negligible in the broader context, considering that impaired loans total around Rs. 1.4 trillion, with only 1.7 percent of these loans been subjected to the remedy.
“The depositors must not be made to feel that their deposits are unsafe in banks. The rising proportion of non-performing loans at over 13 percent is a warning that non-paying borrowing businesses must be expeditiously revived if these are commercially viable. If not so, they must be expeditiously liquidated in an orderly manner with no continuing diminution of asset values,” the SLTA elaborated.
The SLBA stressed that any move to amend parate rights of banks must be initiated with the financial sector regulator (CB), led consultation process to ensure that all concerns are addressed in a fair and balanced manner.
The association also noted that the authorities should explore the option of coming up with a package with multilateral funding to help the sectors affected, which in turn would help the economy to revive.
Fact Friday, 23 February 2024 07:01 AM
All this can happen when people elect leaders who aren't righteous. Decisions purely based on emotions has got a price.
Dee Friday, 23 February 2024 07:38 AM
Simple. Stop giving loans to risky customers. Let them borrow from sharks. Banks will have to reduce their portfolios but lesser risk. The so called SME’s who lobby to stop these laws are willful defaulters and tax evaders. They claim to loose money but have hidden stashes
Kandiah Balendran Friday, 23 February 2024 07:40 AM
Bankers claim the amount is negligible, if so it doesn't matter.
Kumudu Widyaratne Friday, 23 February 2024 10:22 AM
What an idiotic statement. "Over the past month, approximately Rs. 38 billion has been recovered from 557 borrowers through the parate remedy, constituting around 0.4 percent of the total loans. The SLBA deemed this amount is negligible in the broader context, considering that impaired loans total around Rs. 1.4 trillion ..." What is negligible is the amount recovered. Not the amount owed, the burden of which, others have to bear. Improve your reading skills to make your comments worthwhile reading. Wonder if this comment will be published by the 'moderators'.
Mahila Friday, 23 February 2024 08:01 PM
Comments amounts to Irrelevance!!?? When Bad debtors, FAIL to REPAY, depriving new Loans for the Deserving Entrepreneurs, needing Funds for Business Expansion!!?? "Dog in Manger" attitude!? Selfish!!?
ERAN Wicks Friday, 23 February 2024 07:41 AM
Bankers are licensed crooks. Biggest crooks have invested in Havelock city.
Dee Friday, 23 February 2024 01:10 PM
Your comments are just like my domestic! Everyone else on a slightly higher platform are crooks! Typical JVP thinking, why don’t you go blast the transformers of Havelock city and make everyone there live in darkness? Next you can contest the elections on the NPP ticket!
Kabir Hashim Friday, 23 February 2024 07:46 AM
"The SLBA deemed this amount is negligible" so then it shouldn't be a problem. Crooked officials in the banks use parate to blackmail and extort.
Jayaratne Friday, 23 February 2024 08:06 AM
Debt evaders just want to spend 20 or 30 years in court as they can keep enjoying the property during that time. Meanwhile they'll pay for lawyers although they can't pay their debt.
Terrence K Friday, 23 February 2024 08:19 AM
My previous comments that Parate Execution should not be suspended as it had an ulterior motive of delaying repayment as most of the debt evaders were using politicians to do their dirty work. Sri Lanka Banks Association should have been proactive in nipping this move at the bud as politicians who do not know head or tail of banking are toeing the line of these defaulters who very well know that they cannot rob the customers deposits which are channelled for SME facilities when the Parate Execution law is in force. Let these decision makers scrutinize the figures of the impaired loans which totals to Rs. 1.7 trillion and out of this a minute percentage of 1.7 percent is subject to this remedy. The Government always takes foolish decisions without consulting the authorities on this matter similar to the change of fertilizer for agriculture without giving an ear to the doyens of the industry which resulted in a complete flop and a devastation of people's livelihoods!!!!!!!!
Mahila Friday, 23 February 2024 07:29 PM
ABSOLUTELY ON THE MONEY, WITHOUT RESERVATION!!??
Ram Friday, 23 February 2024 09:06 AM
Parate suspension is OK provided the lender can go to court where a ruling can be obtained inside 3 months. A short procedure must be made in to court Rules for the purpose with a special court assigned with that work for the whole island
Thakkadi Sector Friday, 23 February 2024 10:26 AM
All banks, especially the BOC, never send letters at least once a year, to remind dormant accounts and they loot innocent public, testing their memory. They benefit most of the people living with memory issues in old age. If you deposit and maintain a dollar account with this bank, consider your money as dumped in a well. buggers...
Liberal One Friday, 23 February 2024 12:37 PM
This is like legalising debt evasion. This will result in banks been conservative on loans, depriving funding for those who does not evade debt repayment plus increasing interest rate on loans because now loans have a higher risk. This country can never be developed if we entertain these naive socialist ideas.
warren Friday, 23 February 2024 02:54 PM
Some comments manifest a lack of awareness about the fundamentals of economics. In a market-based system, financial institutions perform the essential economic function of "financial intermediation". There are two fundamental problems in lending: adverse selection and moral hazard. They use many analyses to minimise these risks before giving loans, but some smart people still outsmart financial institutions despite comprehensive credit evaluations. If debt defaults continue to happen, eventually, financial institutions will get discouraged from lending, and genuine entrepreneurs will find it difficult to raise capital for promising businesses. Over time, the economy will collapse. Hence, there should be adequate protection for the lender as well. Our culture is such that we always sympathise with the borrower, not the lender. If not for leaders, how can businesses raise finance? Having stringent regulations could, to some extent, discourage bad borrowers from borrowing.
ranil wickramasinghe Friday, 23 February 2024 03:26 PM
SLBA, did u noticed, during the pandemic banking sector make huge profits did u? how comes? during such period u looted money from non performance businesses. now its their turn to say if bank made the profit during most difficult time and this f***** rule must be abandoned
DOT Friday, 23 February 2024 03:34 PM
Banks must pull up their socks! They are very poor in loan appraisals. Just lend what ask. Then extremely poor in follow ups. Same time there is no shortge of under cuts!
Roberta Flack Friday, 23 February 2024 03:46 PM
Giving us petrol and making available dollars on one side and stealing our money through PAYE taxes VAT and SCC. Protecting the political powerful is the key agenda of RW and MR governments.
A.ahmed Friday, 23 February 2024 03:54 PM
This is good move, government is taking ,there will be public support for this , this bankers are lootus,parate act is undemocratic, only court law should have this powers not bankers
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