The Central Bank of Sri Lanka (CBSL) has advocated for legal reforms aimed at fortifying the country's Parate execution law and other credit recovery statutes to ensure business continuity and job security for employees. The move seeks to align credit recovery processes with global standards, thereby shortening the credit recovery cycle.
Dr. Nandalal Weerasinghe, Governor of the Central Bank, emphasized the need to bolster the Parate execution law and other credit recovery regulations to expedite the asset recovery process. He stressed the importance of minimizing the time required to recover assets, enabling banks and businesses to sustain operations while facilitating the transfer of assets from non-viable borrowers to those capable of managing the enterprise effectively.
Speaking at a webinar titled "Can Suspending Parate Rights help SME recovery?" organized by the Daily FT, ACCA, The International Chamber of Commerce Sri Lanka Chapter, the Colombo MBA Association, CIMA, AAT, and CA Sri Lanka, Dr. Weerasinghe underscored the significance of a 3-6 month credit recovery period. This timeline would facilitate the swift acquisition of property and its subsequent transfer to viable borrowers, fostering efficiency and enhancing access to finance for Small and Medium Enterprises (SMEs).
Dr. Weerasinghe distinguished between SMEs and anti-parate activists, emphasizing that the latter primarily comprised willful defaulters. Despite pressure from segments of the business community, particularly SMEs, the Central Bank remains steadfast in its stance against amending banks' Parate execution rights.
The proposed reforms reflect the Central Bank's commitment to streamlining credit recovery mechanisms, promoting economic resilience, and facilitating SME growth amidst ongoing challenges. By advocating for legislative enhancements, the Central Bank aims to create a conducive environment for sustainable business operations and robust financial systems in Sri Lanka.
