Commercial Bank of Ceylon is ready to support borrowers, whose cash flows would be hit in a worse than average disruption from the COVID-19 Coronavirus pandemic, says a top official.
President Gotabaya Rajapaksa had called on banks to halt collections of working capital loans for six months in response to the disruptions from the coronavirus.
By Monday evening, President Rajapaksa had extended the moratorium to credit cards, apparel and tourism industries and to small and medium-sized businesses. Commercial Bank had stopped collection calls for overdue loans a week earlier.
Sri Lanka has been under an island-wide curfew since Friday to stop the spread of the coronavirus, which has also hindered loan collections and denying services to customers who depend on brick and mortar banking branches.
Commercial Bank and its peers have encouraged customers to switch to digital transactions through call centres or ATMs when the curfew lifts for 8 hours on Monday and Tuesday, while practicing government-recommended social distancing and hygiene if visiting branches.
The tourism industry, currently at a standstill, had been under a loan moratorium until March 31 to recover from the April 2019 Easter bombings, and a large number of small and medium-sized enterprises were just starting off a moratorium to help the economy recover when the pandemic hit.
Commercial Bank would look at giving relief to such borrowers as well.
While automated systems would transfer performing loans to non-performing loans if three instalments are in arrears, which would hit bank profitability, Commercial Bank is hoping to have talks with the Central Bank on whether the system could be changed for the duration of the crisis.
Banking sector non-performing loans had risen to 4.7 per cent at end-2019 from 3.4 per cent a year earlier and 2.5 per cent at end-2018 due to a lengthy period of low growth coming from two currency collapse, as the Central Bank targeted interest rates with liquidity injections.
Meanwhile, Banks are also discussing the possibility of charging lower commissions on services such as cheques and delaying penalties on credit card arrears to help the nation overcome the crisis.
The government has promised to give 46 billion rupees in interest arrears to banks over senior citizens scheme, which would help liquidity. If there are signs of the nation bouncing back from the pandemic by end-April, Commercial Bank could see an 8 per cent growth in credit for 2020.
Before the latest crisis, the central bank had hoped for private credit to grow 12-13 per cent in 2020, with both a fiscal and monetary stimulus package to jump-start the economy, which was growing at just over 2 per cent.
The government has helped facilitate the smooth operation of banks’ internal processes during the crisis, and Commercial Bank has allocated more of its staff into call centres and clearing transactions, especially at a time when monthly salaries are usually remitted.
Meanwhile, the banking working group, which is working with the government to ensure the operation of essential banking services during the pandemic, has also additionally forwarded a set of proposals to the Central Bank to help reduce the burden on banks during the crisis.