PM calls for grace period for debt-ridden entrepreneurs

Prime Minister Mahinda Rajapaksa on Monday instructed bank chiefs to focus on giving a grace period, as opposed to taking over the properties of entrepreneurs unable to repay their bank loans following the Easter Sunday attacks and the COVID-19 pandemic.

The Prime Minister emphasised the need to appoint an authority to look into the assets of debtors before auctioning their property by banks due to default. He pointed out that it is essential to look into the reason for the auction and the financial history of the borrower.

Prime Minister Rajapaksa also pointed out the need to amend the existing ordinances so that property cannot be auctioned off without the approval of the relevant authority.

The Premier was addressing a meeting held at the Ministry of Finance today to discuss the problems faced by industrialists due to the COVID-19 pandemic and Easter Sunday attacks.

Minister of Industries Wimal Weerawansa said that despite the Government’s efforts to provide relief to industries affected by the Easter attacks and the COVID-19 pandemic, some industrialists were finding it difficult to repay bank loans due to reasons specific to their respective sectors. The Minister pointed out the need to formulate a special program for them.

Prime Minister Rajapaksa said that in addition to the relief provided by the government to all the affected industries in general, the parties facing this particular problem should specially be considered.

The Prime Minister also instructed the authorities to pay separate attention to the respective sectors in providing relief to them in such cases as the conditions affecting the procurement, production and marketing of raw materials in each industry are different.

The Minister of Industries Wimal Weerawansa pointed out that due to the inability to repay the loans, the properties of some industries are being prepared for auction by the banks.

Pointing out that they are facing this problem as a result of the problematic situation that has arisen in the country, the Minister said that it is the responsibility of the government to assist in restarting those industries.

Prime Minister Rajapaksa emphasised that the method of auctioning property by banks should be revised. He pointed out the need for a third party to intervene in such a situation on behalf of both the banks and the debtors. He added that the need for an authorised ombudsman to intervene in such cases and instructed the authorities to prepare the necessary legal framework. He also said that when issuing loans with property as collateral, the creditor should look into whether the borrower is pledging their residence as the collateral.

The Prime Minister said that if the house had to be auctioned off for any reason, the country would be left with another homeless family even if the bank concluded its transaction. He therefore instructed the authorities to look into the possibility of revising the method of obtaining a loan by putting one’s house as collateral.

Secretary to the Treasury S.R. Attygalle said the legal framework needed to be strengthened to increase the powers of the current financial ombudsman. Accordingly, steps will be taken to amend the Banking Act, he said.

Minister of State Ajith Nivard Cabraal said that a short term, as well as long term, plan would be needed for this. He added that some capital should be invested to empower these businesses.

Accordingly, the Prime Minister instructed the Ministry of Finance, the Central Bank and the relevant banks to reach a final decision on providing relief to the financial problems of entrepreneurs.

The Prime Minister pointed out that such issues have existed for a long time and it is important to resolve them in a manner that does not harm any party.

The Premier said Government intervention would be needed to resolve issues in a fair manner between any party unable to repay a bank loan and the respective banking institutions, and that attention should be paid to setting up a Government agency or authority with legal powers for this purpose.

The Prime Minister said that there is a possibility of providing relief to creditors in each sector, including leasing.

Minister of Industries Wimal Weerawansa, State Ministers Ajith Nivard Cabraal and Shehan Semasinghe, Secretary to the Ministry of Finance S.R. Attygalle, and other senior officials were also present.