Rs. 100 b more for CB-backed banking support for COVID-19-hit biz

Friday, 5 June 2020 02:39 - - {{hitsCtrl.values.hits}}

Cabinet increases Central Bank refinancing facility ceiling from Rs. 50 b to Rs. 150 b
Expansion comes amidst much criticism of program limits, crowding out of smaller companies, shoddy implementation
Minister Bandula Gunawardana says additional funds targeted at SMEs

By Chandani Kirinde

Minister Bandula Gunawardana

The Government yesterday announced a Rs. 100 billion addition to the Rs. 50 billion refinancing facility of the Central Bank through which banks extend urgent working capital support for businesses hit by the COVID-19 pandemic.

The Rs. 50 billion refinancing scheme, announced in March, has run into much criticism, as it has been unable to cover many companies, especially the small and medium enterprises that it was initially targeted to assist. The implementation process has also been slammed for being cumbersome and unclear.

The Cabinet of Ministers, which met on Wednesday, had decided to therefore triple the refinancing scheme.

The proposal to increase the refinancing limit was presented to Cabinet by Prime Minister Mahinda Rajapaksa in his capacity as the Finance Minister. Banks have started to lend via the Central Bank refinancing scheme to impacted private sector companies via the loan scheme titled “Saubagya COVID-19 Renaissance Facility.” A concessionary interest rate of 4% is applicable and maximum amount to be lent as two months working capital is Rs. 25 million per applicant targeting the SMEs.

Cabinet Spokesman Bandula Gunawardana said the decision to increase the refinancing facility was taken as there were complaints from those who wanted to obtain the concessionary loan. There were also concerns about crowding out as big and small companies vied for the limited moratorium.

“This facility is to help Small and Medium Enterprises (SMEs), the garment sector and other local businesses which were severely affected by the COVID-19 outbreak. We discussed the matter in depth and Cabinet gave approval to increase the refinancing facility from Rs. 50 billion by another Rs. 100 billion to Rs. 150 billion,” he said.

Cabinet approves pushing tax payment deadlines to 20 June