CB issues guidelines to establish Business Revival Units in licensed banks to help rescue viable troubled businesses

The Central Bank has issued guidelines for the establishment of Business Revival Units (BRU) in licensed banks to support the revival of viable businesses, the CBSL said in a statement on Wednesday (03).

The aim of setting up the BRUs is to assist both performing and non-performing borrowers of licensed banks whose businesses are fundamentally viable to revive, the statement said.

It said that the licensed banks have already established Post COVID-19 Revival Units and the CBSL has issued guidelines to strengthen the functions of the above units and reformulate such units as BRUs.

The enhanced scope of proposed BRUs will facilitate sustainable revival of viable businesses affected by the extraordinary macroeconomic conditions, the CBSL said.

The challenging macroeconomic conditions that prevailed during the recent years have disrupted businesses, adversely impacting the ability of borrowers to duly repay their loans, and thereby impairing the recovery process of licensed banks, the statement said.

The CBSL said licensed banks are required to have robust business revival and rehabilitation policies and procedures to support the revival of businesses, and large banks with more than 50 branches, may consider establishing BRUs at large branches/regional offices of banks, in order to support the revival of businesses of affected borrowers more effectively and efficiently.

CBSL added that the fundamental viability of a business is a key factor in the consideration of business revival by a licensed bank, and that in the viability assessment, both financial and non-financial indicators are taken into consideration.

The borrower’s continuous cooperation will be critical for the process of reviving a stressed business, CBSL said.

The business can be revived through both financial and operational restructuring tools and processes, and the selection of an appropriate set of revival tools is subject to the mutual agreement of parties involved in the revival process, CBSL said.

Licensed banks are required to establish BRUs by mid-May 2024, and be fully compliant with the requirements of the Circular by July 1, 2024, it said.

According to the Department of Census and Statistics about 20 percent of small and medium scale businesses had been closed down during COVID pandemic and the subsequent economic crisis.