What is the purpose of this facility?

The purpose of this liquidity facility is to enable licensed commercial banks (LCBs) to provide loan facilities to the Construction, Pharmaceutical Sectors and such other identified sectors, that was adversely affected by the COVID-19 outbreak against a “Letter of Acceptance of the Payment of Outstanding Bills (LAPC)”.

Who is eligible to receive a “Letter of Acceptance of the Payment of Outstanding Bills (LAPC)” from the Government Treasury?

Contractors and Suppliers of the Government in the Construction, Pharmaceutical Sectors and such other identified sectors, who are having outstanding dues from the Government of Sri Lanka.

Who select the eligible borrowers?

Relevant line ministries and Government departments.

What is the procedure to select Contractors and Suppliers?

Please refer to Treasury Operations Circular No. 01/2020 on “Economic Revival Assistance to Government Contractors/Suppliers in the Construction and other Sectors” issued by the Secretary to the Treasury on 29.06.2020 on the following web-link.
http://www.treasury.gov.lk/treasury-operations-department

Who issues the LAPC and to whom?

Secretary to the Ministry of Finance, Economy and Policy Development issues the LAPC to the designated licensed commercial bank (LCB) as specified by the Contractor/Supplier with a copy to the Contractor/Supplier.

Where can LAPC be collected from?

From the relevant line ministry or the Government department.

What is the Designated Bank Account?

A bank account nominated by the Contractor/Supplier, of which the account details have been provided to the relevant line ministry or the Government department.

In a scenario where an LCB had already funded a client for a project, can the client request for new funding against LAPC for the same project, without settling the current dues of the same project?

The Treasury issues the LAPC to Contractors/Suppliers up to the value of outstanding dues from the Government, excluding dues already agreed for discounting by LCBs. A client with a LAPC is eligible to request for the liquidity facility, from the designated LCB and LCB is required to ensure that, total funds provided under this liquidity facility is exclusively utilized for on-lending to the sectors specified in the Operating Instructions.

What is the maximum loan amount to be granted under LFCS per borrower?

A client with a LAPC is eligible to request for the loan from the designated bank at an interest rate not exceeding 4% upto the amount specified in the LAPC.

What is the interest rate, CBSL provide funds to LCBs under LFCS?

CBSL provide funds to LCBs at an concessionary interest rate of 1% per annum.

Will the rate of interest (1% per annum) at which the CBSL provide funds to LCBs under LFCS remain unchanged until the full recovery of the loans?

1% interest rate will remain unchanged upto 180 days.

What is the maximum lending rate for Contractors/Suppliers under LFCS?

Maximum interest rate is 4% per annum.

What is the maximum repayment period of the borrower?

LCBs may need to apply prudent lending standards, as LAPC confirms that the Treasury will provide necessary funds to settle the outstanding dues to the designated accounts of the banks on or before 31.12.2020.

Can an LCB retain a margin against LAPC to secure interest of the loan?

LCBs may need to apply prudent lending standards in this case.

At what stage, should the LCB release the loan. Before receiving of funds from the CBSL or after receiving funds from the CBSL?

LCBs may grant loans prudently and request for funds from CBSL as a liquidity support. Otherwise, LCB should ensure disbursement of the loan proceeds to eligible borrowers within one week from the date of receipt of the funds from the CBSL.

How long will the CBSL take to release funds requested under LFCS?

Central Bank will release funds to the Banks within one business day subject to fulfillment of requirements specified in Operating Instructions issued in this regard. If the requests are received before 1200 noon, the funds will be released on the same day.

What is the repayment period for LCBs for the funds borrowed from the CBSL?

As liquidity facility is for 180 days, the CBSL will deduct the principle amount of the loan plus the interest from the Current Account of the respective Bank in 180 days from the date of release of funds by the CBSL.

Should the customer pay interest to the bank on a monthly basis?

Banks may need to apply prudent lending standards in this case.

Can the interest to the Bank for the 180 days calculated at 4% per annum be recovered upfront at the time of disbursement?

Banks may do it with the concurrence of the borrower.

What should an LCB do, in the case of an early settlement of dues to the Contractors/Suppliers by the Government?

LCBs are required to immediately repay the CBSL, the total amount including the interest upto that date.

What is the procedure to renew the financing from CBSL in the event of non-receipt of proceeds to the relevant LAPC after 180 days?

LAPC confirms that the Treasury will provide necessary funds to settle the outstanding dues to the designated accounts of the banks on or before 31.12.2020. However, if the Government decides to issue fresh LAPCs to Contractors/Suppliers for unsettled amounts, immediate fresh funds will be made available at maturity of the facility upon submission of similar fresh promissory notes by the bank backed by pledged Treasury bills and Treasury bonds with the Central Bank.

What are the securities that can be pledged to obtain funds under LFCS?

LCBs can only pledge Treasury Bills and Treasury Bonds in their own holding as securities.

What is the procedure for LCBs to pledge securities under LFCS?

Securities should be pledged through the On-line Electronic Bidding System, similar to the procedure followed in pledging securities in Open Market Operations.

What are the documents that need to be submitted to the CBSL to request for LFCS?

LCBs are required to submit the following documents to the CBSL with the request for LFCS:

1. Duly filled loan agreement
2. Duly filled pledge agreement/s

How to obtain the above documents?

All documents and information required to be submitted by LCBs including operational manuals to generate Schedule III and contact information have been forwarded to CEOs of all Banks on 23.07.2020.

Contact details to clarify doubts related to the LFCS

   1. For further information from the Central Bank on LFCS, you may contact;
       - Domestic Operations Department (011-2477050, 011-2477626, 011-2477044)

   2. For further clarifications from the Department of Treasury Operations on LAPC, you may contact;
       - Mr. R M A Rathnayake, Director General (Tel: 071-8321648) or
       - Mr. Dilip Silva, Additional Director General (Tel: 071-4441020)

Who are eligible for moratorium under the COVID-19 relief scheme?

Self-employed individuals and other individuals who have lost their jobs or income due to the outbreak of COVID-19.

All facilities obtained for the sectors identified in the Section 2 of the circular No 5 of 2020 issued on 27.03.2020, and individual’s income/ businesses have been really affected by Covid-19 and with sufficient proof of documents that person/ business obtained the facility for that purpose are eligible customers for the moratorium.

What are the business/sectors eligible for the COVID-19 reliefs?

Tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers that have been adversely affected by work disruption and overseas lockdowns resulting from COVID – 19. There is no turnover limit stipulated for these business/sectors to avail the concessions.

Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorized domestic pharmaceutical suppliers with turnover below Rs. 1 bn (for this annual turnover is considered based on the latest available accounts or estimates).

Most of the complaints are relating to not offering 6 months moratorium. Who are eligible to have six months moratorium? If eligible and company has offered less period what actions can be taken?

Individuals and Businesses as in FAQ 1 and FAQ 2 are eligible for a moratorium period as in FAQ 8. If a customer is an eligible customer and was not offered the moratorium or has been offered lesser period than eligible, he/she may discuss with the financial institution citing the circulars issued by the CBSL and get into an agreement.

What is meant by Debt Moratorium?

Debt moratorium refers to the deferment of capital and/or interest payments which fall due within the respective concession periods.

However, debt moratorium does not mean a waive-off of capital and /or interest permanently. The customer should pay the capital and/or interest payments which fall due within the concession periods at a later date according to the revised repayment plan.

From whom can I get these reliefs?

All licensed banks, licensed specialized banks, licensed finance companies and specialized leasing companies that are regulated by the Central Bank of Sri Lanka will be offering these reliefs, as per the relevant instructions given in the circulars.

Loans granted by lending institutions other than above regulated entities are not eligible for reliefs.

What types of credit facilities are eligible for reliefs under this scheme?

Credit facilities to be supported under this scheme shall be term loans, leasing facilities, pawning, overdrafts and trade finance facilities subject to the requirements specified.

It was observed that there are different loan types or different names used by different companies in addition to the general loan facilities they provided like "term loans" "leases", etc., and several customer complaints have received by us and the CBSL management that LFCs/SLCs are refusing to provide moratorium for those types of facilities saying that such loans are not covered in the cited circulars.

Though those different names are not mentioned in the circulars issued by CBSL, if these facilities have obtained for the sectors identified in the Section 2 of the circular No 5 of 2020, and Individual’s income/Business have been really affected by Covid-19 and with sufficient proof of documents that person/Business obtained the facility for that purpose, those customers are eligible for the moratorium. i.e., customer may have obtained a facility for tourism related activity but the loan name is not mentioned in the circular. If customer can prove that facility has obtained for the tourism related activity and his income got affected due to the current situation, he is eligible for the moratorium.

What is the effective date for these reliefs?

The loan installments and /or lease rentals that fell due on or after 25.03.2020, for a specified period as mentioned in FAQ 8.

What is the moratorium period?

If your moratorium request has been accepted by the LFC/SLC, the financial institutions shall offer a debt moratorium for the period as given below:
(a) A six-month debt moratorium on the leasing rentals of all three-wheelers, school vans, lorries, small goods transport vehicles and buses and related assets such as motor bikes and taxies operated by the self-employed/ owners.
(b) A debt moratorium until 30.05.2020 was granted on personal loans to all private sector non-executive employees.
(c) A three-month debt moratorium for all personal loans and leasing where the granted amount is less than Rs. 1 million.
(d) A six-month debt moratorium for affected industries in small & medium enterprises, tourism, apparel, plantation, IT and related logistic service providers.
(e) A six-month debt moratorium for all other eligible businesses/sectors specified in the Section 2 of the circular No 5 of 2020.

Are there any extensions given to the moratorium period?

Financial institutions shall extend the existing 6 months moratorium period granted in terms of Paragraphs 2 and 3 of Circular No. 05 of 2020 issued on 27 March 2020 to 12 months (further 6 months from end September) in respect of capital outstanding of leasing facilities granted to tourism related vehicles.

However, borrowers need to service interest during the moratorium period. Financial institutions may recover interest during the moratorium period from eligible borrowers, in a manner that is not inconvenient to the borrower.

Financial institutions shall waive off the accrued penal interest in respect of leasing facilities granted to tourism related vehicles.

Do I have submit a request to avail these relief? If so How?

Yes. The customer was expected to submit a request on or before 15.05.2020 through online facilities or other convenient communication arrangements.

What happens if someone has requested for the moratorium after 15th May?

The customers were expected to submit a request on or before 15.05.2020 through online facilities or other communication arrangements including – mail/SMS/WhatsApp, etc. Any moratorium request received after the deadline cannot be accepted. However, if the company is willing to extend the moratorium to such customers, CBSL has no objection for such facilitations.

How will I know if I have been granted the concession, upon request?

The financial institutions were required to complete processing of customer requests within 45 days from the date of receipt of the request. The financial institutions were required to notify the outcome of the request within this 45 days time period.

What about the credit facilities which remained overdue (in arrears) prior to the effective date of the scheme?

Concessions were required to be granted for the loans installments/lease rentals that fall due on or after 25.03.2020.

However, if the credit facility remains in performing category with an arrears/overdue position, the customer may request the financial institution to cover that arrears within the applicable moratorium period.

For example, if loan installments for February and March 2020 remained in arrears for a performing loan which is eligible to get a 6 months moratorium period starting from April 2020. The customer may have requested the financial institution to backdate such moratorium period to start from February 2020. In this case, the six months will be counted from February 2020 and not from April 2020.

Will LFCs/SLCs recover the capital and interest installments that are applicable for the moratorium period from the customers in future? If so how?

Yes. As per the circulars, the respective moratorium only gives customers the ability to defer the repayment of capital and interest. as such, the moratorium does not require the LFCs/SLCs to waive-off the capital and/or interest installments. No additional interest will be charged by LFCs/SLCs from customers, on the deferred capital and/or interest installments.

How the Capital and Interest component will be calculated and charged for the Moratorium Period?

Repayment of Capital is as follows:

For example, the moratorium will work as follows –

Example

If a customer eligible for a 6 months debt moratorium from April 2020, then that customer will now not be required to pay installments to the LFCs/SLCs from April 2020 to September 2020. However, this customer will be required to pay monthly installments of Rs.97,926 from October 2020 to the initially agreed date of March 2021 and for additional six months until September 2021. Basically, original repayment schedule will be extended by an equal period of time to the moratorium with the same installment value to be paid by the customers.

Interest accrual during the moratorium period is as follows:

Interest shall continue to be accrued during the moratorium period on a concessionary rate and such accrued interest shall be converted in to a new interest free term loan, which shall be recovered from the borrower.

E.g., for calculation of Monthly Interest Charge: Interest charge per month of April 2020= Outstanding loan amount at the commencement of the moratorium period (Beginning of April 2020) * (concessionary rate/12).

LFCs and SLCs shall recover the interest free loan from the borrower using the two options given below with the consent of the eligible borrower.

The concessionary rate that can be charged to option 1 and option 2 shall be up to11.5% per annum. Further, the consent of the borrower shall be obtained for the option selected, after duly explaining the different implications of the options considered including total interest cost to be paid and time value of money.

Option 1 – LFCs/SLCs shall recover the interest free term loan in equated monthly installments after the end of the moratorium period and the repayment period shall be 2 years or remaining maturity period of the credit facility, whichever is lower.

Option 2 – LFCs/SLCs shall recover the interest free term loan after the end of the contractual period (extended contractual period after considering the moratorium) in installments not exceeding the monthly installment of the original contract.

Will I be charged any penal charges or late payment fees for credit cards facilities, whether I am eligible or not for concessions?

All financial institutions have been instructed not to charge any penal charges or late payment for credit cards and other credit facilities during the period up to 30.09.2020.

Is there a special interest rate charged on private buses for the Moratorium?

All LFCs/SLCs shall accrue an interest rate of 4 per cent per annum during the moratorium period for leasing facilities granted to private passenger buses.

Whether CBSL conducts any evaluation for the granting the moratorium as some companies have informed so to their customers?

No, CBSL does not conduct any evaluation for granting the moratorium.