The Sri Lanka Ditwah loan scheme is expanding as twelve private banks apply to participate in the cyclone relief program, strengthening access to affordable financing for businesses affected by recent natural disasters across the island.
Sri Lanka Ditwah loan scheme expands as private banks seek cyclone relief role
Sri Lanka’s post-disaster financial recovery framework is set to broaden as twelve private commercial banks have formally applied to participate in the Sri Lanka Ditwah loan scheme, a concessionary credit facility introduced to support businesses impacted by cyclone-related disruptions. The initiative, which is currently being implemented through state-owned banks, represents a coordinated effort to stabilise economic activity in vulnerable regions while ensuring continuity for small and medium-scale enterprises.
According to officials at the Treasury, the move to include private banks reflects the scale of economic damage caused by the cyclone and the diverse banking relationships maintained by affected borrowers. Manjula Hettiarachchi, Director General of the Department of Development Finance, confirmed that applications from private lenders have been received and that discussions are progressing to finalise participation agreements. He noted that many customers of private banks have experienced direct operational setbacks, underscoring the need for wider institutional involvement in the relief effort.
The government has allocated 10 billion rupees to fund the Ditwah facility, signalling a significant fiscal commitment despite ongoing budgetary pressures. The scheme offers loans at a fixed interest rate of three percent, substantially below prevailing market rates, to ease the financial burden on enterprises struggling with cash-flow interruptions, damaged inventories, and delayed receivables following the cyclone.
Under the program’s terms, eligible borrowers are granted a six-month grace period, allowing businesses time to resume operations before repayment obligations begin. The total repayment period extends to three years, providing manageable instalments designed to support working capital requirements rather than long-term capital expenditure. Treasury officials have emphasised that the facility is aimed at preserving employment, restoring supply chains, and preventing a wave of business closures in affected districts.
The expected entry of private banks is also intended to accelerate loan disbursements by leveraging their branch networks, digital banking platforms, and existing customer data. State banks initiated the rollout of the scheme shortly after its approval, but demand has continued to grow as damage assessments expand and more enterprises formally document losses. Incorporating private lenders is likely to improve geographic coverage and reduce processing bottlenecks.
Officials indicated that memoranda of understanding with the applying private banks are expected to be signed by mid-January, after which disbursements can begin under uniform guidelines. These agreements will outline eligibility criteria, reporting requirements, and risk-sharing arrangements to ensure consistent implementation across participating institutions.
In parallel with the Ditwah initiative, the Central Bank of Sri Lanka has introduced complementary relief measures to stabilise the broader credit environment. These include a six-month moratorium on loan repayments for eligible borrowers and provisions for loan restructuring without the imposition of penalty interest. Together, these steps aim to prevent temporary liquidity stress from escalating into long-term solvency challenges for businesses already affected by economic volatility.
Financial analysts note that the combined approach of subsidised lending and regulatory relief reflects lessons learned from previous disaster-response programs. Rather than relying solely on grant-based assistance, authorities are prioritising structured credit solutions that encourage recovery while maintaining financial discipline within the banking system.
The expansion of the Sri Lanka Ditwah loan scheme also highlights the increasing role of public-private collaboration in economic crisis management. By aligning government funding with private sector distribution channels, policymakers hope to achieve faster outcomes without placing excessive strain on state-owned financial institutions.
As climate-related events continue to pose risks to economic stability, officials suggest that frameworks such as the Ditwah scheme could serve as a template for future emergency financing mechanisms. The current expansion may therefore have implications beyond immediate cyclone relief, shaping how Sri Lanka responds to similar shocks in the years ahead.