Only 0.4% of loans recovered using Parate laws – CBSL

The banking sector has recovered less than 0.5% of total loans with the help of Parate execution, the governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe said on Friday (29) at a press conference in Colombo.

Dr. Weerasinghe said that a previous Supreme Court decision had prevented banks from using Parate laws on third-party assets put up as mortgages.

However, it had recently been changed by the Supreme Court, he said. The Court unanimously had held that the properties mortgaged to a bank not only by an actual borrower but also by a third party for the loan granted to the actual borrower could be sold at an auction to recover the unpaid loan and interest thereon, he said.

“A group of organised individuals who have not paid loans from banks are now trying to convince people that Parate laws must not be used against them. If we allow this, people’s money will have to be used,” he said.

Depositors’s money accounted for about 81% of the liabilities in banks and shareholder capital amounted to only 7%, he said.

“The banks have used Parate laws sparingly. In the last 11 months, only about 38 billion were claimed from 557 people using Parate laws. This seems like a large amount, but this is about 0.4 percent of total loans,” Dr. Weerasinghe said, noting that there were about Rs 1.4 trillion worth of impaired loans. Even out of this, only 1.7 percent of loans had been subjected to Parate laws, he added. Dr. Weerasinghe said that if the banks were not allowed to use Parate laws, they would hesitate to give loans, and that would affect the economy greatly.