Economy & Growth

Regulations for speedy MSME recovery via business revival units coming up

With an aim to expedite the recovery of Sri Lanka’s micro, small and medium (MSME) sector, the Central Bank (CB) is gearing up to issue regulations for operations of business revival units within the licensed banks.CB Governor Dr. Nandalal Weerasinghe, addressing the 34th anniversary convention of the Association of Professional Bankers this week, updated that most banks have set up these special units.To address the heightened levels of impaired assets in the licensed banks and to enhance their role in the recovery of businesses, particularly the small and medium enterprises (SMEs), the CB last month announced that all licensed banks would be required to set up business revival units.

These specialised units within the licensed banks are designed to provide targeted support and facilitate the recovery of the businesses grappling with economic challenges.

He also announced that the much-anticipated National Credit Guarantee Institution (NCGI) would be soon established. The institution is expected to play a crucial role by offering credit guarantees to boost the SME sector while simultaneously mitigating the potential credit risks associated with lending to the SMEs. The Asian Development Bank-backed NCGI is expected to be set up as a public-private partnership, with an initial capital infusion of around US $ 110 million, with the participation 10 banks and three non-banking financial institutions initially.While acknowledging the difficult operating environment of the SMEs, Dr. Weerasinghe express optimism of normalisation of some of these conditions, in particular driven by easing of supply chain constraints.

However, he stressed that the banks need to swiftly pass down the benefits of monetary easing to the SMEs and public, in a way of reduced market lending rates. In waiting for monetary policy transmission to take effect, the CB has taken a pause on further monetary policy easing.Dr. Weerasinghe said he expects the private sector growth to pick up this year, amidst the decreasing interest rate combined with the expected gradual decrease of government, in particular the state-owned enterprises, competing for credits from the banking sector. According to an International Labour Organisation survey, the business operations of 89 percent of the MSMEs surveyed were severely impacted by the economic crisis. (NF)

First Monetary Policy Report for 2024 released today

The Central Bank released today the first Monetary Policy Report (MPR) for 2024.The report is prepared to communicate with the public and other stakeholders the rationale for the monetary policy decisions taken during the relevant period of review and intends to provide some guidance on the way forward in terms of what could be expected with respect to inflation and other key economic variables.

The inaugural MPR was published in July 2023.

( Source : Daily Mirror)