Mysterious funds approach Sri Lanka in this crisis
The current crisis in Sri Lanka has presented a fresh opportunity for mysterious funds to extend credit lines to local banks, bankers said.
They said this trend has come in the wake of the exchange rate crisis and the country’s default along with the country rating being very low.
When the government is downgraded to default grade, the banks in the country are also automatically put in the same grade as they cannot get a better rating than the sovereign, which opens up opportunities for such funds, analysts said. “There is extraordinarily little appetite to extend funds by well-known entities to Sri Lanka at the moment. However, we have been approached by certain funds which are not very well known in the market in the past few months,” a senior banker in a mid-sized bank told the Business Times.
Other bankers said that there are preliminary level discussions at nascent stages with these funds, but they are very cautious in considering them. “We need to be careful with them. We must also remember that despite the country defaulting, none of the Sri Lankan banks has defaulted, even by a single day. This was also amidst the most challenging times. The banks have been very prudent,” a second banker said. He also explained that most banks had to hold import letters of credit because they had to save the dollars to pay their creditors.
Another banker said that the bank is very careful with the know your customer rules and anti-money laundering rules that may come with these types of funds and credit lines and that they will ‘not touch these’.
A senior state banker noted that these offers are not even being considered as serious by them. However, he said that earlier foreign banks, who did not want to discuss with the local counterparts, have now opened their positions to discuss credit lines for them and things are looking positive after the recent International Monetary Fund staff
level agreement.
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