Candauda Arachchige Saliya – Department of Business Management, Sri Lanka Institute of Information Technology, Malabe, Sri Lanka

Part of the Book: Advances in Business and Management. Volume 24
Chapter  DOI: 10.52305/YAFB7687

Abstract

This abstract provides a comprehensive overview of the recent developments surrounding Parate Execution in Sri Lanka. The Cabinet of Ministers’ approval for a temporary suspension until December 15, 2024 reflects a response to economic challenges, particularly for small and medium-sized enterprises (SMEs). Parate Execution, deeply ingrained in Sri Lanka’s legal system, has been a crucial tool for banks in recovering debts. However, diverse perspectives from legal, banking, and economic standpoints highlight the complexity and implications of this legal mechanism.

The suspension of Parate Execution prompts critical discussions on its impact on borrowers’ reputations, the banking sector’s profitability, and the broader economic landscape. The legal and banking communities grapple with questions about the law’s original intent, its role in economic development, and the potential drawbacks of a blanket suspension. Insights from key legal judgments, such as the expanded interpretation by the judiciary, add layers of complexity to the Parate law. Examining the implications of Parate Execution on non-performing loans (NPLs) reveals challenges in collateral availability, political influence, and the eventual write-off of loans. The abstract advocates for a balanced and targeted approach in the suspension, emphasizing its application in sectors vital for economic vitality to avoid exploitation and ensure equitable recovery.

This study not only examines Sri Lanka’s Parate Action procedure but also provides a comparative analysis with debt recovery mechanisms in India, the United States, the United Kingdom, Australia, and New Zealand. By exploring the unique features and implications of these international systems, the study offers valuable insights into the delicate balance between creditor rights and debtor protections. Furthermore, it identifies key principles and best practices from international experiences that can inform the refinement of Sri Lanka’s debt recovery framework, ultimately contributing to a more equitable and effective system for all stakeholders involved.

In conclusion, the evolving dynamics surrounding Parate Execution necessitate a nuanced understanding of its legal, financial, and economic dimensions. Striking a balance between debtor protection, banking sector interests, and economic stability remains a paramount goal in shaping effective debt recovery processes in Sri Lanka. The Cabinet of Ministers has approved a temporary suspension of Parate Executions until 15 December 2024 aiming to alleviate the strain on small and medium-sized enterprises (SMEs) grappling with financial challenges. It has been reported that more than 1,000 Parate actions were officially published in the gazette last year. In some cases, borrowers might seek a court injunction to halt auctions initiated through Parate actions.

References

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