ECONOMYNEXT – Removing Sri Lanka’s parate execution powers and making it less easy to recover loans, will make it more difficult for small and medium enterprises to get loans from banks, Central Bank Governor Nandalal Weerasinghe said.
“If these laws are taken away it will hurt depositors and SME’s,” he said after presenting an annual policy speech.
“Banks will be reluctant to give to other SMEs if there is no way of recovery when someone defaults.”
Sri Lanka’s Justice Minister Wijedasa Rajapaksa has said so-called ‘parate execution’ provisions are archaic and date back to Roman dutch law, and are not found in other countries.
“The term may be archaic but other countries have debt recovery laws as well, even advanced economies. There are stronger methods employed in around the world, in India, Pakistan,” Weerasinghe said.
“Mortgages are the banking system’s biggest business. For the financial system to operate successfully, there must be a recovery mechanism. ”
About 13 percent of loans from Sri Lanka’s banks are in default after a currency crisis. (Colombo/Jan10/2024)