Foreclosure remains a last resort as banks focus on cooperation and loan restructuring post-crisis
The Sri Lanka Banks’ Association (SLBA) has emphasized that parate execution—the foreclosure of mortgaged assets—has been used in only 1% of non-performing loans (NPLs) between 2019 and 2023, countering claims that it is a common or aggressive recovery method.
In the wake of Sri Lanka’s recent currency crisis and the COVID-19 pandemic, NPLs surged to nearly 13%, prompting the government to suspend parate law enforcement until March 2025. Banks also extended loan moratoriums by three additional months, enabling borrowers more time to restructure debt and stabilize their finances. In many cases, grace periods have now been extended through December 2025.
Despite these relief measures, the SLBA stated that “a handful of borrowers” have resumed agitation, falsely portraying banks as preparing for a wave of parate auctions. The association firmly rejected this narrative, asserting that banks prioritize loan recovery through dialogue and cooperation, not asset seizure.
“Parate laws are a legal safeguard, designed to protect depositors’ funds lent in good faith to support individuals, SMEs, and businesses,” said the SLBA. “Foreclosure is always the last resort.”
The association encouraged distressed borrowers to proactively engage with their banks to find workable solutions, noting that the vast majority of clients are already collaborating constructively.
This clarification comes at a critical time, as financial stability and public trust remain key priorities in Sri Lanka’s economic recovery.