The suspension of the parate execution law, which allows banks to auction collateral on defaulted loans, has been extended until March 2025, President Anura Kumara Dissanayake said in Parliament.

The law was previously set to remain suspended until December 15, 2025 following a conditional approval of the Committee on Public Finance (COPF) under the previous Government.

President Dissanayake said the decision to extend the suspension by three and a half months was made following concerns raised by Sri Lanka’s banks, regulators, and small and medium enterprises (SMEs) about challenges in loan repayment and the impact of the law on struggling businesses.

However, he cautioned that a complete suspension of the law could create issues for banks and financial institutions, stressing for the need to balance support for SMEs while protecting the banking system.

President Dissanayake said that the total outstanding debt currently stands at Rs. 1,385 billion, involving 752,886 debtors. Of these, 99% are defaulters with loans of less than Rs. 25 million, he said.

“Defaulters who have loans below Rs. 25 million will be given an opportunity to restructure their debt until December 12, 2025. They must present a debt restructuring plan to their banks by March,” the President said. (Newswire)

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Banks and financial institutions can only seize lease defaulted vehicles if there is no resistance from the vehicle owner, State Minister of Finance Ranjith Siyambalapitiya said today.

State Minister Siyambalapitiya stated that Parate execution is not utilized for the seizure of vehicles. 

The State Minister made the remarks in Parliament today making a statement on the use of Parate execution, a practical foreclosure procedural law.

Banks and financial institutions can seize properties under the Parate execution only if the loan amount exceeds Rs. 5 million.

The Parate execution has been utilized by 19 organizations, including banks and financial institutions on 173 instances from January to June this year, he stated.

State Minister of Finance Ranjith Siyambalapitiya added that the law was utilized for loans amounting to a total of Rs. 15 billion. (NewsWire)

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