A circular focusing on measures to accelerate the fall in market lending rates is due to be issued by the Central Bank of Sri Lanka on Friday (25).
Accordingly, a circular is due to be issued tomorrow focusing on methods to ensure that the lending rates reflect the recent Monetary Policy relaxation, CBSL Governor Dr. Nandalal Weerasinghe explained.
He further added that the expectation of at least a 3% reduction in interest rates by December will also be reflected in these methods.
Dr. Weerasinghe made these remarks during a press conference held at the Central Bank.
In late July, the CBSL governor had urged the licensed commercial banks to take immediate measures to adequately reduce lending rates in view of the policy interest rate cuts, stating that “Such rigidity of lending rates would be counterproductive in the process of envisaged economic recovery.”
Dr. Nandalal Weerasinghe, in a letter directed to the Sri Lanka Banks’ Association (SLBA) chairman, had emphasized that the Central Bank would be compelled to take administrative measures in the event the banking and financial sector fails to take adequate and expeditious adjustments in this regard.
Explaining that the central bank recently dropped the policy interest rates by 450 bps on two occasions with a view to enabling the economy to reach its potential while stabilising inflation at mid-single digit levels in the medium term and easing pressures in the financial markets, the governor said it is thus expected that market interest rates – particularly lending rates – will adjust downwards “adequately and swiftly”.
He further noted that such efforts would enable individuals and businesses to re-commence or continue the repayment of credit facilities and improve the sustainability of borrowers which will lead to a positive impact on the real sector resulting in the banking sector performance to improve.
(adaderana.lk)
