The Cabinet of Ministers has approved the extension of the moratorium on the execution of the ‘Parate’ Law, which halts banks from acquiring creditors’ properties, until 31 March 2025.

Announcing this week’s Cabinet decisions this morning (10), Cabinet Spokesman, Minister Nalinda Jayatissa stated that the economic crisis faced by Sri Lanka in the past 04 years has severely affected the Small and Medium Enterprises (SMEs), and it has been reported that small and medium entrepreneurs have had to face difficulties in settling the loans obtained from banks.

Under that situation, an environment has been created in which the properties of a significant number of business people have been taken over by banks and auctioned due to loan defaults, and therefore, the sale of properties at public auction has been temporarily suspended until 15 December 2024 by amending the Recovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990, the Minister added.

Further, Jayatissa expressed that requests have been made by associations related to the SMEs to further extend the moratorium on the ‘Parate’ Law execution.

Meanwhile, the Cabinet Spokesman noted that the government has observed that it is more appropriate to create the necessary environment for achieving a positive solution for both parties by introducing an action plan for the repayment of such defaulted loans instead of allowing the auction of properties.

Accordingly, the Cabinet of Ministers has approved the proposal submitted by the President in his capacity as the Minister of Finance, Planning and Economic Development to extend the suspension of the execution of the ‘Parate’ Law until 31 March 2025.

Furthermore, it has also been approved that the Central Bank of Sri Lanka should prepare a multi-dimensional mechanism to resolve this issue with the active participation of all stakeholders including public and private banks and other government institutions.