The Sri Lanka Banks’ Association (SLBA), representing all licensed commercial banks in the country, today issued a statement firmly rejecting attempts by a small group of borrowers to create alarm and confusion over the potential use of parate laws and assuring the business community and the public that banks have no intention of launching widespread parate proceedings now that the grace period has ended.
Following the suspension of parate laws by the Government up to 31st March 2025, the banking sector voluntarily extended the moratorium for a further three months, enabling borrowers in difficulty to engage with banks and restructure their loans. As a result, many borrowers obtained further relief on repayments, in some instances extending the grace period up to December 2025.
With this period now concluded, a handful of borrowers has resumed agitation, seeking to whip up panic about a purported imminent flood of parate actions and auctions of mortgaged assets. The SLBA categorically states that these claims are not only exaggerated but are dangerously counterproductive at a time when the majority of borrowers are working constructively with banks to revive their businesses.
“We wish to reassure existing and potential borrowers that there is no intention by banks to rush into parate action,” the SLBA said. “The reality is that only a very small fraction of borrowers default to the extent that they become eligible for parate execution. Of that fraction, the overwhelming majority are still assisted by their banks to reschedule loans and avoid asset sales.”
To illustrate this point, the SLBA pointed out that in the five years prior to the suspension of parate laws—between 2019 and 2023, which were among the most challenging years for debt servicing in Sri Lanka—less than 1% of non-performing loans were ultimately subjected to parate action. This data underlines that parate execution is used strictly as a last resort when all attempts at resolution have failed.
“The attempts by some parties to portray parate laws as an aggressive first response by banks are both misleading and unhelpful,” the SLBA said. “In truth, parate laws exist to protect depositors’ funds, which are lent in good faith to support individuals, SMEs, and larger enterprises alike. Banks prefer to retain their customers and recover loans through cooperation rather than enforcement.”
The Association further noted that the banking sector has shown significant patience and flexibility, supporting thousands of businesses affected by the Easter Sunday attacks, the COVID-19 pandemic, and the economic crisis. Even now, all banks maintain dedicated Business Revival Units to help distressed borrowers restructure loans and re-establish viable operations, and are even working with borrowers who are outside the parameters established to support customers impacted by adverse economic events since 2020, the Association said.
“It is deeply regrettable that instead of engaging with these mechanisms, a small number of borrowers are seeking to incite fear and erode public confidence in the financial system,” the SLBA said. “Such actions risk undermining both the stability of the banking sector and the prospects of genuine borrowers who are committed to meeting their obligations.”
The SLBA concluded, “We urge all borrowers facing difficulties to approach their banks without delay to explore solutions in a transparent and proactive manner. The strength and stability of the banking system—on which depositors, investors, and the wider economy rely—depend on responsible behavior and constructive engagement, not misplaced panic.”
