Sri Lanka’s banking sector faces a precarious situation following the government’s decision to suspend parate execution rights, a move widely perceived as succumbing to pressure from influential debt evaders. This decision has sparked concerns about the sector’s ability to facilitate economic recovery effectively.
Expressing apprehension, the Sri Lanka Banks Association (SLBA) conveyed its belief that this intervention undermines the banks’ capacity to fulfill their vital role in revitalizing the nation’s economic sectors. The association expressed alarm over the recent statement made by State Minister of Finance, Ranjith Siyambalapitiya, in parliament, urging the government not to yield to the delaying tactics employed by borrowers.
Highlighting the prevalence of non-performing loans at 13 per cent within the sector, the SLBA emphasized the urgent need to swiftly resolve non-viable commercial ventures owned by distressed borrowers.
In the past month alone, approximately Rs. 38 billion has been recovered from 557 borrowers through parate remedies, a figure the SLBA considers negligible given the broader context of impaired loans totalling around Rs. 1.4 trillion. The association stressed that only a small fraction (1.7 per cent) of these loans has been subject to parate execution.
The SLBA further emphasized the importance of safeguarding depositors’ confidence in the banking system, citing the rising proportion of non-performing loans as a warning sign. It advocated for the prompt revival of viable businesses and orderly liquidation of non-paying ventures to prevent further erosion of asset values.
Additionally, the association underscored the necessity for any amendments to parate rights to be initiated through a consultative process led by the financial sector regulator, the Central Bank (CB), ensuring all concerns are addressed equitably.
Moreover, the SLBA urged authorities to explore the possibility of devising a multilateral funding package to aid affected sectors, thereby facilitating broader economic revival.
