Are we ready for the parate party to come to an end?

This is a kind reminder for us in the industry to start getting ready now itself, and start negotiating with banks

We know very well that for the last four years the construction industry has been suffering due to delayed/non-payments, stoppage of projects, high interest rates, etc. So, many of us perished. Banks and contractors became enemies, with banks making extreme decisions such as seizing assets, with no relief. Parate became a very attractive idea for us. 

However, the GoSL and Central Bank directed banks to provide relief to industries like construction, leisure and agriculture and become flexible. So banks established separate units specifically for restructuring non-performing loans (NPL) because banks were also suffering from abnormal NPLs, which threatened their stability. Thus under the Central Bank guidance, many banks made case-by-case analyses and restructured NPLs. 

The largest five banks in Sri Lanka were very successful in this endeavour and many amicable settlements have been made. Also, many companies, after receiving the moratorium, which CIOB worked effortlessly to get, resolved their issues. Therefore, companies who were well-managed have survived this wave of crises.

After all of this, only around 1% of NPL could not solve their issues. Out of this 1%, banks have identified that the majority of them are in this position due to mismanagement of their companies and/or lack of transparency with banks. 

Banks have claimed that this 1%, who proposed and endorsed the halting of parate, have dragged good companies who were successfully negotiating with banks and managing payments, into their sinking boat.  At the end of this year, our request to halt parate execution expires. And, if we do not manage properly, we are left to face its compounded effects. However, the Central Bank is lenient, at the same time they are keeping an eye out and pressuring banks to manage their NPL. Banks are dealing with depositors’ money which is managed by employees who are responsible for their respective boards. They thus have no personal gain. 

A word of caution

Therefore, this is a kind reminder for us in the industry to start getting ready now itself, and start negotiating with banks, otherwise we risk losing many of our brother companies.

 To avoid having to donate all our hard-earned money to lawyers, we, especially SMEs should get ready sooner rather than later so we do not end up in the crib, which is the graveyard which our businesses cannot come back from. 

(The writer is President of Ceylon Institute of Builders.)