Limited Scope

Sri Lankan Prime Minister Ranil Wickremasinghe (2nd R) arrives to visit the site of a bomb attack at St. Anthony's Shrine in Kochchikade in Colombo on April 21, 2019. - A string of blasts ripped through high-end hotels and churches holding Easter services in Sri Lanka on April 21, killing at least 156 people, including 35 foreigners. (Photo by ISHARA S. KODIKARA / AFP) (Photo credit should read ISHARA S. KODIKARA/AFP/Getty Images)

The government plans to form an asset management company to takeover the debts of the two state banks.
A top Central Bank official said the upcoming Bank Rescue Law, will makes its way to parliament before end September.

rnrnThe debt recovery and collection agency or RACA will be modelled on similar lines to the successful Malaysian model, Danaharta.

rnrnFollowing the Asian financial crisis, the Malaysian government set up this asset management company to isolate and remove bad debts, that were crippling its banking sector.

rnrnDanharta put these non-performing loans (NPL) into a separate company at a pre-determined valuation. In return, the government took an equity stake in these banks on a pre-determined proportionate basis.

rnrnThe NPLs were then restructured in a systematic manner into viable entities and sold off or liquidate if they were not viable.

rnrnBy wiping of bad debts, the banks could then move forward and embark on fresh lending to fuel economic growth.

rnrnAccording to bank