MoF, PSBs talk Sri Lanka crisis with its lenders

Officials of the finance ministry and some state-run banks have met Sri Lanka's banking industry and central bank officials to assess the financial crisis in the island nation, including debt repayment to some foreign entities. "There was also a discussion about looking at various ways to address the foreign debt owned by Sri Lanka to some countries including China," said a bank executive aware of the developments. "We gave them suggestions and they are examining all possibilities."

State-run lenders involved in the discussion include State Bank of India, Indian Overseas Bank and Indian Bank, and all three have operations in Sri Lanka, the executive said.

Sri Lanka is battling its worst economic crisis and owes China around $6.5 billion. Negotiations are on to restructure this debt. Last week, it defaulted on its payment, and Fitch Ratings downgraded the country to "restricted default".

The country is in talks with the IMF for a bailout.

The Indian delegation, which also had representation from the finance ministry and Indian Banks' Association including its chief executive Sunil Mehta, had also met officials from Sri Lankan banks and banking association in April to assist them in devising strategies and assess the regulatory gaps.

So far, India has extended assistance worth $2.5 billion over the past two to three months to Sri Lanka which includes credit facilities for fuel and food. India has maintained that it will continue to assist the neighbouring country to recover from the economic crisis.