The Central Bank has introduced several new remedial actions to support the government’s efforts in reviving the economy, following the advices given by President Gotabaya Rajapaksa to high-ranking official of the Central Bank including its Governor, yesterday (June 16).
Disbursement of Rs. 150 billion under the refinance scheme for the benefit of businesses affected by the COVID-19 pandemic is among some of the facilities to be provided by the Central Bank.
Accordingly, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1% against the pledge of a broad spectrum of collateral, on the condition that LCBs, in turn, will lend to domestic businesses at the rate of 4%, while ensuring the best possible distribution of this facility.
Accordingly, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1% against the pledge of a broad spectrum of collateral, on the condition that LCBs, in turn, will lend to domestic businesses at the rate of 4%, while ensuring the best possible distribution of this facility.
During yesterday's meeting held with the Central Bank officials President Rajapaksa has directed them to provide loan facilities to collapsed enterprises under the existing refinance scheme using guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past.
Accordingly, the Monetary Board of the Central Bank, at its meeting held yesterday, decided to provide funds at concessionary rates using the guarantees. In addition it has decided to introduce a new credit scheme exclusively for construction sector enterprises.
The objective of this initiative is to provide loan facilities at the concessionary rate using the guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past.
The objective of this initiative is to provide loan facilities at the concessionary rate using the guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past.
Apart from these measures the Monetary Board of the Central Bank in support of the government’s efforts in reviving the economy, at its meeting held on 16 June 2020, decided to reduce the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of licensed commercial banks (LCBs) by 200 basis points to 2.00 per cent, with effect from the reserve maintenance period that commenced on 16 June 2020.
This reduction in the SRR injects around Rs. 115 billion of additional liquidity to the domestic money market, enabling the financial system to expedite credit flows to the economy, while reducing the cost of loans by LCBs. The financial sector is expected to pass the benefit of the high level of liquidity and the reduced cost of funds to the economy without delay, by increasing lending to businesses and households at low rates.
During yesterday's meeting, President Rajapaksa warned the Central Bank officials for being inactive in the face of financial companies collapsing and for being silent regarding malpractices of leasing companies. In response to these issues, the Governor of the Central Bank Prof. W.D. Lakshman has appointed a three-member committee to probe into alleged irregular and unlawful activities at finance and leasing companies.
Director General (Legal) to the President, Attorney at Law Hariguptha Rohanadheera chairs the Committee while the Director of Legal and Compliance Department of the Central Bank K. G.G. Sirikumara and the Director Supervision of Non-Bank Financial Institutions at the Central Bank J. P Gamlath are the other members.
The Committee is entrusted with the task of probing activities carried out by all finance companies especially by finance companies which have not registered under the Central Bank. The report of the Committee is to be submitted within 14 days.
The Central Bank has stated that the production economy is recovering with the relaxation of the rules enforced to control the COVID-19 epidemic. The food and beverage, textile and apparel sector has seen significant growth. The production sub-index reported an index value of 51.1 in May compared to mere 3.5 reported in April.
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