Saubagya loan grace period extended by 3 months: CB

 Central Bank of Sri Lanka

• Grace period of 4% working capital loans increased from 6 to 9 months
• Recipients requested to write to relevant banks for extension
• Monetary authority says decision due to second COVID-19 wave
• Saubagya scheme has a repayment period of 2 years
• Over 61,000 businesses have received assistance worth Rs. 177 b

The Central Bank yesterday extended the grace period of its 4% Working Capital Loan Scheme from six to nine months after recipients ran into unforeseen repayment issues due to the second COVID-19 wave current sweeping across the country.  Issuing a short statement the Central Bank called on anyone who wished to avail themselves of the grace period to send a request to their relevant bank.

“Having identified the national importance of revamping businesses affected by the COVID-19 pandemic, the Central Bank of Sri Lanka (CBSL), in consultation with the Government of Sri Lanka, implemented the Saubagya COVID-19 Renaissance Loan Scheme Facility in three phases to provide working capital loans at the interest rate of 4% per annum, with a repayment period of 24 months, including a grace period of six months.”

However, it is observed that most of the borrowers have experienced difficulties in revamping their businesses as expected, due to the second wave of the COVID-19 pandemic. Therefore, having considered the importance of facilitating and encouraging borrowers to repay the loans without any failure, the CBSL has decided to extend the grace period applicable for the loans registered under Saubagya COVID-19 Renaissance Facility by an additional three months, upon the written request made by the borrowers, the statement added. 

Accordingly, beneficiaries of these working capital schemes who wish to receive a grace period of nine months are required to send a written request to the relevant bank.

The Rs. 150 billion loan scheme was launched earlier this year following multiple appeals by the private sector following the first round of the COVID-19 response. Initially it was expected to be Rs. 50 billion but was extended to Rs. 150 billion and provided support to thousands of businesses. 

The Central Bank of Sri Lanka, as of 15 October, has approved 61,907 loan applications received from COVID-19 affected businesses. These applications were for a total of Rs. 177,954 million and registered under the three Phases of the Saubagya COVID-19 Renaissance Facility. So far, the licensed banks have released loans amounting to Rs. 133,192 million among 45,582 affected businesses islandwide.

Phase I of the loan scheme was implemented with effect from 1 April 2020. Both Phase II and III of the loan scheme were introduced with effect from 1 July 2020. The intention of these schemes was to provide a total of Rs. 150 billion as working capital loans at interest rate of 4% per annum. These loans enjoy a repayment period of 24 months, including a grace period of six months. The recipients were the businesses, including self-employment and individuals, adversely affected by the COVID-19 outbreak.

In view of the large number of requests received from the affected businesses, the Central Bank of Sri Lanka decided to accept applications regardless of the Rs. 150 billion limit originally envisaged. All applications of the affected businesses received up to the announced deadline were therefore served through the loan scheme.