The Cabinet of Ministers has given its approval to publish the Draft Bill of the Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990, which was amended to facilitate legal provisions for the suspension of Parate Law.

Cabinet’s approval comes after the Attorney General cleared the Bill drafted by the Legal Draftsman.

Accordingly, the Draft Bill of the Loans by Banks (Special Provisions) Act will subsequently be tabled in Parliament for approval.

At its meeting convened on February 26, the Cabinet of Ministers green-lighted a proposal made by President Ranil Wickremesinghe, in his capacity as the Finance Minister, to suspend the Parate Law until December 15, 2024.

As per the Cabinet’s decision, the banks’ practice of acquiring properties of whose loans are yet to be paid off will be suspended until December 15 and Section 4 of the Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990 will be amended to facilitate the necessary legal provisions.

The government earlier said it observed that large-, medium- and small-scale businesspeople in the country had to face numerous constraints to maintain their businesses during the economic hardships that prevailed over the past 3 years.

Although the economy has revived to some extent now, certain issues still exist pertaining to paying off the loans obtained from the banks for the medium- and small-scale businesses. Under such circumstances, adhering to existing legal provisions, banks have been acquiring properties of a considerable number of businessmen due to non-payment of loans and subsequently auctioning them.

For this reason, the government said a sufficient grace period should be granted to pay off the loans without being a burden to the banking system.

In light of this, the Cabinet of Ministers in February approved the proposal tabled by the President to put a temporary halt to the acquisition of properties of loan defaulters by banks and to amend the Recovery of Loans by Banks (Special Provisions) Act.