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ECONOMYNEXT – Sri Lanka’s banks will be directed to formally set up business revival units that will help re-structure companies whose loans have gone bad, the central bank said.
Business revival units were required to be set up initially during the covid pandemic, but now they will be made a permanent service of banks.
“We hope to issue a directive next month, for banks to set up BRUs which will help guide and strengthen small and medium enterprises,” Governor Weerasinghe told reporters Tuesday.
“The circular will expand the scope of the BRU.” The central bank received technical advice on this from the World Bank, and in keeping with practices in other countries.
Senior Deputy Governor Yvette Fernando said revival units will identify businesses that can be revived.
“There will be some criteria,” companies that fit the criteria will be guided to restructure after “a policy is approved on what type of institutions will be subject to it.”
The business revival unit will be a separate and independent unit from the lending side.
“It will be headed at the DGM level and will work independently of those giving the loan.
Some borrowers in trouble had loans from multiple banks, she said.
“This will require some sort of coordination and a database to be created. Then we can assess their repayment ability and cash flows.” The ADB is helping with the establishment of a guarantee institute. (Colombo/Mar26/2024)
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