By: Staff Writer March 12, Colombo (LNW):The Sri Lanka Banks Association (SLBA) yesterday said the unilateral decision by the Government to suspend debt recovery via parate laws is a knee-jerk response to intense lobbying by a few individual defaulters that do not represent the wider business community. The association noted that it will have a far-reaching negative impact on the banking sector, which functions as the heart and lifeblood of the economy. The SLBA represents all banks licenced by the Central Bank of Sri Lanka (CBSL) including state banks, public listed companies and branch offices of international banks. It said banks were s alarmed over state intervention to curb debt recovery laws, pointing out that there had been no consultation with the banks, and cautioning that the cost of borrowing will increase for all borrowers as a result of the Government decision. The association members also emphasised that the suspension of parate execution will not preserve a mortgaged asset of a defaulter, as banks will continue to exercise mortgage action through the courts of law. “The ‘parate’ execution provision is only one option available to banks in the debt recovery process, that mitigates the impact of the delays in the process,” the SLBA pointed out. Until existing laws are amended by Parliament, banks will, where appropriate, use the parate remedy as a last resort, prior to going to court. The process requires each individual case to be put to the banks’ boards of directors and the publication of notices in the media. It is not a process that can be implemented at the whim of any bank officer. Bank’s deploy depositors’ funds when lending to the public, and the inability to recover money due from defaulters or extended delays in recovery, will potentially place public deposits at risk The suspension of parate action will interrupt and stall ongoing initiatives of international agencies such as the IMF, World Bank Group, and the ADB as well as the Central Bank which are working with the banks to establish a resolution process that includes revival of distressed debt of banks by helping borrowers towards rehabilitation and preservation of residual value of such business assets The banks have already absorbed the cost of extending relief to borrowers especially MSMEs during recent crises affecting the economy including the April 2019 terror attacks, COVID pandemic and on-going economic crisis where the parate process was suspended for as long as possible The SLBA said its members have observed with alarm, the statements attributed to a decision made by the Cabinet of Ministers, that the debt recovery remedies available to banks, under the current laws may be amended.