CB approves Rs.178bn in loans for COVID-19 affected businesses, individuals

• Goes beyond Rs.150bn originally committed for the loan scheme 
• So far, banks have disbursed Rs.133.1bn among 45,582 affected biz island-wide

The Central Bank has approved Rs.178 billion worth of loans under its Saubagya COVID-19 Renaissance facility from April 1 through October 15, surpassing the originally determined limit of Rs.150 billion committed for businesses and individuals hurt by the pandemic. 

The facility was announced later in March at the onset of the pandemic in the style of a refinance scheme, where the participating banks could borrow from the Central Bank at 1 percent and on-lend to pandemic affected parties at 4 percent for working capital requirements for two years, including a grace period of six months. 

The scheme, which was introduced initially with Rs.50 billion under Phase I, was tripled in June to Rs.150 billion under two other phases. 

While the phase II deepened the money pot in a way a large swath of affected parties could benefit, the phase III had the Central Bank undertaking to provide a credit guarantee scheme of up to 80 percent of the loan to encourage the banks to accelerate disbursements out of their own liquidity, 

with interest subsidy of 5 percent being paid by the Central Bank for such loans. 

The scheme, which was originally intended to keep open till the end-August was extended till September 15 as there were about one quarter of the funds remaining to be lent by August 18. 

“In view of the large number of requests received from affected businesses, the Central Bank of Sri Lanka decided to accept applications regardless of the Rs.150 billion limit originally envisaged,” said the Regional Development Department of the Central Bank in a statement. 

“All applications of the affected businesses received up to the announced deadline were therefore, served through the loan scheme,” it added. 

By October 15, the Central Bank had approved 61,907 applications received from pandemic-affected businesses, which had a total value of Rs.177, 954 million and registered under the three phases of 
the scheme. 

“So far, the licensed banks have released loans amounting to Rs.133, 192 million among 45,582 affected businesses island-wide,” the statement said. 

Among the lenders, which disbursed the most amount of loans under the scheme were: Bank of Ceylon with Rs.34.3 billion in loans across 16,266 borrowers; Commercial Bank of Ceylon PLC with Rs.24.4 billion in loans among 5,097 applicants and Hatton National Bank PLC with Rs.15.3 billion in loans among 
3,761 applications. 

The refinance scheme broadly succeeded in achieving its objectives of providing financial assistance at an extremely concessionary rate to businesses and self-employed whose incomes were undermined by the pandemic, to help them bounce back fast.

It also partially revived the private sector credit growth in the economy as banks turned aggressive in lending amid the undertaking of the credit risk by the Central Bank.