The Central Bank of Sri Lanka (CBSL) has directed all licensed banks to implement a comprehensive set of relief measures for individuals and businesses affected by the recent cyclonic and flood disasters. The directives, issued through Circular No. 04 of 2025 on 5 December, follow proposals submitted by the Sri Lanka Banks’ Association (Guarantee) Ltd. and aim to provide urgent financial support without jeopardising overall financial system stability.
Under the guidelines, licensed banks are required to extend relief to borrowers whose incomes or operations were directly impacted by the adverse weather events. Affected borrowers may request assistance—either in writing or electronically—until 15 January 2026.
Temporary Debt Relief
Banks have been instructed to suspend repayment of capital and/or interest on existing credit facilities for a period of three to six months, depending on individual circumstances. During this suspension period, banks are barred from charging interest above the original contracted rate and must ensure that no additional interest is levied on deferred interest payments.
New Credit Facilities for Recovery
To support recovery efforts, banks have also been asked to consider granting new loan facilities based on borrowers’ repayment capacity. These facilities will include:
A minimum grace period of three months after the end of the repayment suspension.
A maximum fixed interest rate of 9% per annum—or the borrower’s existing contractual rate, if lower—for loans with a tenor of up to two years.
For loans exceeding two years, interest rates may be adjusted after two years based on the Average Weighted Prime Lending Rate (AWPR), in line with the loan agreement.
Waiver of Charges and Penalties
Until 31 January 2026, banks must suspend cheque return fees, stop-payment charges, late payment fees, restructuring or modification fees, and penal interest on all facilities held by affected borrowers. Any system-generated charges applied during this period must be refunded within three business days.
Clear Disclosure and Appeals Process
CBSL has emphasised transparency in the restructuring process, requiring banks to clearly communicate all terms, including capital, interest, and other charges, before obtaining borrower consent. In cases where relief is denied, banks must provide written reasons and inform borrowers of their right to appeal to the Director of the Financial Consumer Relations Department of the CBSL.
The Central Bank has also advised banks not to reject new loan applications solely on the basis of adverse Credit Information Bureau (CRIB) records linked to disaster impacts.
The CBSL noted that these banking-sector measures complement the broader disaster relief initiatives rolled out by the Government, aimed at restoring livelihoods and supporting a swift revival of affected economic activities.
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