The following measures have been announced by the Government as at 08.05.2020:
Banking and Finance:
The Monetary Board of the Central Bank of Sri Lanka by Circular No.4/2020 dated 24.03.2020 has directed Financial Institutions (i.e. Licensed Commercial Banks, Licensed Specialized Banks & Leasing companies) to:
- Implement a debt moratorium (Capital & Interest) on –
- Lease rentals of specified vehicles operated by the self- employed for 6 months.
- Personal loans of private sector non-executive employees until 30.05.20.
- All personal loans lease rentals under the value of LKR 1 million for 3 months.
- Affected small/ medium enterprises, tourism, apparel, plantation and IT, related logistic service providers for 6 months.
- Provide working capital requirements at 4% interest (with interest waived for at least 6 months) for the sectors mentioned in (d) above. The interest subsidy will be included in re finance.
- Accommodate loan applications in respect of the above until 30.04.20 and finalize the same within 45 days. [UPDATE: The Monetary Board of the Central Bank of Sri Lanka Circular No.6/2020 dated 29.04.2020 extended the submissions deadline for eligible borrowers until 15.05.2020)
- Fix a maximum interest rate of 15% for credit card transactions up to LKR 50,000/- , reduce minimum monthly payment on credit cards by 50% , extend repayment deadline for credit cards below limit of LR 50,000 /- and extend validity of cheques under LKR. 500,000/- until 30.04.20.[UPDATE: The Monetary Board of the Central Bank of Sri Lanka Circular No.6/2020 dated 29.04.2020 extended the Validity of Cheques until 15.05.2020)
- Specified opening times for licensed banks on non- curfew days and directions to corporate branches to be kept open during curfew to facilitate international transactions pertaining to several sectors including food and medicine.
The abovementioned circular was supplemented by Monetary Board Circular No.05/2020 dated 27.03.2020 which further elaborated on how the above concessions were to be implemented. The said circular specified inter alia that licensed commercial banks, licensed specialised banks, licensed finance companies and specialised leasing companies (hereinafter referred to as Financial Institutions) would be eligible to participate in this re-financing facility to support COVID-19 hit businesses including self-employment businesses and individuals commencing 25.03.2020.
Salient provisions of the said circular include:
- Setting up a six-month Re-Financing facility of LKR 50 Billion to implement to aforementioned concessions in support of COVID-19 hit businesses including self-employment businesses and individuals.
- The eligible sectors/ businesses have been specified as:
- 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.
- 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 LKR 1 billion.
- Self-employment businesses and individuals who have lost their jobs or income due to the outbreak of COVID-19.
- Foreign currency earners (individuals and corporates) who have to repay loans in foreign currency and whose incomes/ businesses have been adversely affected due to the outbreak of COVID-19.
- Limiting import facilities under this scheme to pharmaceutical drugs, medical equipment, food, fertilizer and essential raw materials and machinery and equipment.
- Credit facilities supported under this Financing Scheme shall be term loans, leasing facilities, pawning, overdrafts and trade finance facilities denominated in Rupees and foreign currency subject to the requirements specified.
- Specifying that financial institutions are to suspend recoveries processes throughout the duration of processing applications of the parties who have applied for relief through this scheme.
- Concessions for Existing Performing Loans as at 25.03.2020 include extensions for permanent and temporary overdraft facilities (with a capped interest of 13% for the extension period), eligible trade facilities and pawning facilities.
- Concessions for Existing Non-Performing Loans (NPLs) as at 25.03.2020 include waivers of penal interest, rescheduling of loans/advances and suspension of recovery legal actions/ auctioning off assets of the borrowers in accordance with the process set out in the said Circular.
- Directing financial institutions to make provision to grant an additional loan or a new loan facility in LKR for working capital or investment purposes subject to conditions specified in the said circular, provided that the borrower submits a credible business plan.
- Defer capital repayments on refinance loans granted to licensed banks falling due from 01.01.2020 until 31.12.2020. However, banks are required to seek extension if required and enter into supplementary agreements with the relevant Government agency in this regard.
- Directing financial institutions not to decline an application under this scheme solely bases on an adverse Credit Information Bureau (CRIB) record and develop a reporting modality in respect of the capital deferment granted under this scheme to performing borrowers, so that participation in the Scheme will not have an impact on the credit score of borrowers in the future, or be negatively reflected in future CRIB reports.
- Directing financial institutions to not charge for cheque returns, stop payments, late payment fee on all credit cards and other credit facilities during the period up to 30.09.2020.
- Imposing new reporting requirements on financial institutions to report the details of moratorium availed by their borrowers to the Bank Supervision Department and the Department of Supervision of Non-bank Financial Institutions, as relevant, as at 15th and 30th of each month, within 5 working days, commencing from 01.05.2020.
In addition to the above it has also been announced that:
- Several State Banks (Bank of Ceylon, Peoples Bank, National Savings Bank) along with Sri Lanka Insurance Corporation, The Employees Provident Fund and the Employees Trust Fund will jointly invest in the treasury bonds and bills to stabilize the money market at a 7% interest rate.
- The Central Bank, Commercial Banks, Insurance Services and the Treasury have been defined as Essential Services to ensure that they continue operations throughout curfew.
- The Monetary board of the Central Bank of Sri Lanka (CBSL) has decided to reduce its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) by -25bps each to 6.25% and 7.25% respectively whilst reducing the Statutory Reserve Ratio (SRR) by -100bps to 4% with effect from 17.03.20.
On 03.04.20 ,the Monetary Board of the Central Bank , decided to further reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 25 basis points to 6.00 per cent and 7.00 per cent, respectively, effective from the close of business on 03 April 2020 in order to complement the measures taken thus far to ease market conditions, and enable the domestic financial market to provide further relief to businesses and individuals affected by the COVID-19 pandemic.
On 15.04.20, the Monetary Board also decided to allow the Bank Rate to automatically adjust in line with the SLFR, with a margin of +300 basis points and accordingly decided that the Bank Rate, has been effectively reduced by 500 basis points from 15.00 per cent to 10.00 per cent from 16.04.20.
UPDATE: On 06.05.2020, the Monetary Board of the Central Bank having reviewed the current monetary policy stance and decided to further reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 5.50 per cent and 6.50 per cent, respectively, effective from the close of business on 06 May 2020.
- The Monetary Board of the Central Bank has also decided to introduce the following measures to assist Licensed Finance Companies (LFCs) and Specialized Leasing Companies (SLCs) in order to support businesses and individuals affected by the COVID-19 Pandemic:
- Reduction of maintenance of liquid asset requirement for time deposits, savings deposits and borrowings to ease liquidity stress faced by LFCs/SLCs due to sudden withdrawal of cash by depositors and non-repayment of loan rentals.
- An extension of one year to comply with minimum core capital requirements. Accordingly, a timeline of 01.01.2020 and 01.01.2021 already set for the enhancement of capital up to Rs 2bn and Rs 2.5 bn will be extended until 31.12.2020 and 31.12.2021, respectively.
- Defer the enhancements of minimum capital adequacy requirements due by LFCs/SLCs on 01.07.2020 and 01.07.2021, for a further period of one year until 01.07.2021 and 01.07.2022 respectively.
- Relax deadlines on submission of statutory returns by permitting all LFCs/SLCs to submit statutory returns to the Department of Supervision of Non-Bank Financial Institutions within two weeks of the commencement of normal business operations.
- The Central Bank has directed Licensed Commercial Banks and the National Savings Bank to suspend the following for three months commencing from 19.03.20:
- Suspend facilitating importation of Motor Vehicles.
- Suspend facilitating importation of non-essential goods specified in Banking Act Directions No.01 of 2020, under Letters of Credit, Documents Against Acceptance and Advance Payment.
- Suspend the purchase of Sri Lankan Sovereign Bonds by licensed Sri Lankan banks.
- The Central Bank has also placed limitation on the issuance of foreign currency travel notes by Authorized Dealers.
- The government has decided to suspend foreign exchange controls and taxes relating to inflows of foreign exchange for a period of 3 months commencing from 02.04.2020. The Central Bank has also announced that such forex remittances will be protected under banking secrecy provisions. The opening and maintaining of a “Special Deposit Account” in the form of Term deposits in specified foreign currencies or Sri Lankan Rupees was announced via Extraordinary Gazette No.2170/4 dated 08.04.20 in this connection.
- The Monetary Board of the Central Bank of Sri Lanka by Monetary Law Act Order No.1/2020 dated 27.04.2020 has imposed a maximum interest rates on pawning advances granted by licensed commercial banks and licensed specialized banks.
- The government by Extraordinary Gazette No.2169/3 dated 02.04.20 [Order under Section 22 of the Foreign Exchange Act No.12 of 2017] has placed certain restrictions (subject to the exceptions stated therein) on outward remittances/repatriation of funds for a period of 3 months commencing from 02.04.2020.
- The Securities and Exchange Commission of Sri Lanka (via directive SEC/DG/03/35 dated 31.03.20) has granted a moratorium to the clients of all licensed Stock Brokers and registered Margin Providers from the payment of interest on credit extended to them, which are due during the period commencing 11th March 2020 effective until 30.06.2020.
- The Colombo Stock Exchange (CSE) has via Circular No.03-4-2020 dated 10.04.20 has granted listed companies time extensions for submission of financial statements and has also extended timelines in respect of instituting enforcement action against companies which are non-compliant with certain specific CSE Rules. The CSE has also introduced a guidance note on the hosting of annual general meetings in light of the COVID-19 pandemic (Circular No.13-03-2020 dated 27.03.20.)
Labour and Employment:
The following measures have been announced by the Presidential Secretariat:
- Benefits of the “Agrahara Insurance Claim” at the National Insurance Trust Fund, for all state employees in the sectors of Health, Police and Civil Security Forces are to be doubled.
- Suspend loan repayment deductions from salaries of 1,500,000 public sector employees.
- Arrangements be made to pay the trainee allowance (for March 2020) of graduates recruited for employment under the graduate employment scheme.
- Provide relief for private businesses that are not in a position to pay employees’ wages due to the prevailing economic hardships.
- It has been announced that the payment deadline for Income Tax and VAT has been extended until 31.05.2020. Accordingly, the Department of Inland Revenue has extended the VAT payment deadline (for February and March 2020) up to 30.04.2020 with any system-imposed penalties being waived off accordingly.
- The state-owned retail network -Lanka Sathosa and Co-operative shops will be exempt from VAT, other local taxes and charges.
- The Department of Inland Revenue has extended the submission deadline of the Transfer Pricing Disclosure Form until 31.05.2020.
- The Department of Inland Revenue has extended the payment deadline of Compounded Stamp Duty for specified parties (for the quarter ending 31.03.20) up to 31.05.2020.
- The Department of Inland Revenue has extended the Withholding Tax payment deadline (for February and March 2020) up to 31.05.2020 with any system-imposed penalties being waived off accordingly
- The Department of Inland Revenue has also made arrangements for applications for project extensions under Section 22(7) of the VAT Act and applications for permanent and temporary VAT Registration for importation to be made and processed electronically.
- The Department of Inland Revenue has extended the validity of extension letters issued in respect of the VAT Deferment Facility on Imports at the Customs/BOI until 30.06.2020. The said deadline also applies for temporary VAT registrations which expire prior to this date.
- The Department of Inland Revenue has extended the deadline for the submission of appeals to Tax Appeals Commission in respect of appeal deadlines which fell during the period of 15.03.20-15.05.20
- A special bank account (COVID – 19 Healthcare and Social Security Fund”) has been opened by the Presidents Fund into which LKR 100 million has been deposited to be utilized for tasks related to preventing the spread of the Covid-19 including providing necessary healthcare and relief measures.
- The establishment of a Presidential Task Force to direct, coordinate and monitor the delivery of continuous services for the sustenance of overall community life. The main function of the task force is to ensure the continuous operation of the food supply chain by making arrangements and liaising with all relevant parties including farmers, agriculture officials as well as the banking, corporate and transport sectors.
- The president has also directed the Presidential Task Force established to administer essential services to make arrangements for the payment of an allowance of LKR5,000/- to specified low-income families/ disadvantaged persons.
- The establishment of a Presidential Task Force to Task Force for Economic Revival and Poverty Alleviation to inter alia give special attention to the economic and social challenges and opportunities facing Sri Lanka during the Corona pandemic, provide necessary guidance jointly with relevant institutions for a production economy.
- The establishment of a Presidential Task Force to study and provide instructions on measures to be taken by all armed forces to prevent Coronavirus infection among members of the tri-forces.
- The President has also instructed the Sri Lanka Ports Authority to provide assistance and relief to all ships calling at Ports of Sri Lanka. Accordingly, it has been announced that all ships have been exempted from demurrage and entry charges.
- Beneficiaries of the “Samurdhi Relief Programme” (A government assistance programme for disadvantaged persons) are to be issued an interest free advance payment and specific nutritional food items as food aid.
- A sum of US$5 Million has been pledged as a contribution to the SAARC COVID-19 Emergency Fund
- The government has also announced that the deadline to pay Utility Bills, Assessment Taxes and Driving License renewal fees will be extended.
- The government has introduced temporary restrictions on the import of specified goods set out in Schedule 1 of the Imports and Exports (Control) Regulations No. 01 of 2020 published in Extraordinary Gazette No.2171/5 dated 16.04.20 which will be in effect from 16.04.20-15.07.20.
- The government has issued PS/GPA/Circular/20/20 dated 18.04.20 which sets out (health and safety) guidelines to be followed by all government offices upon resuming work during the COVID-19 pandemic.