Saturday, 17 April 2021 15:58

 Finance Companies get green light to raise foreign funding Featured

Cash strapped government has been compelled for the introduction of a Regulatory Framework to Facilitate Foreign Currency Borrowings by Licensed Finance Companies
A regulatory frame work has been introduced to facilitate Foreign Currency Borrowings by Licensed Finance Companies.

The Monetary Board of the Central Bank has issued directions on foreign currency borrowings by Licensed Finance Companies (LFCs) on 9th April 2021 with a view to provide flexibility for LFCs to obtain low-cost funding from foreign sources to support their business expansions.

The objectives of these directions are to stabilise any financial volatilities created by the foreign funding exposures of LFCs and provide a risk management framework for such foreign currency borrowings.

Prior to these directions, CBSL permitted LFCs satisfying criteria such as utilization for purposes with national interest, maturities over 5 years, complying with the prudential requirements, etc. to raise foreign currency borrowings on a case-by-case basis up to 10 percent of total assets.

Considering that several LFCs have been raising foreign borrowings at relatively lower costs to finance their business operations, their satisfactory track record in loan repayments and the current market developments, the new directions have been introduced with several features.

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