Banks will most likely bring down interest rates only after the next few months despite urging from the Central Bank (CB) to cut rates charged from their customers.
Secretary General of the Bankers’ Association Upali De Silva said the CB has asked banks to consider reducing interest rates but noted that reducing rates across the board is not possible as several banks have taken deposits at high rates of interest which cannot be changed. “I foresee banks not reducing too drastically because they lend against the existing deposits and have to pay higher interest rates.
They cannot start lending at lower rates. Even now, new loans will attract a nominal 0.5% to 1% reduction.” He added that sizeable reductions in interest rates will only be possible over the next few months.
Mr. De Silva said penal rates have been brought down and some banks have selectively reduced interest rates to certain sectors and industries. There have also been some informal meetings between the CB and banks where the importance of reducing rates was stressed. A CB press release this week urged banks to reduce rates saying he easing of the monetary policy stance of the Bank was intended to facilitate a reduction in lending rates, thereby promoting private sector lending. |
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