Colombo bourse boost from interest rate cuts
View(s):Interest rates were cut this week and a ceiling on lending is set to lapse by end 2012 in an effort to stimulate business activity, the Central Bank (CB) said this week.
Bankers and businessmen have said high interest rates and the credit squeeze have affected sentiment and investment since February this year. The credit ceiling was aimed at tackling high consumer credit, rising imports and a possible overheating of the economy. The latest policy measures would also stimulate the depressed stock market which has seen a flight of capital to banks with investors opting to put their money in a better return from higher interest rates. “The lower interest rate regime could bring back funds to the stock market,” one broker said The CB announcements came on the same day it met bankers and communicated the need to stimulate business confidence. Accordingly, the CB’s policy rates have been reduced by 25 basis points each (on Repurchase and Reverse Repurchases) while the ceiling on rupee credit extended by banks would expire at end 2012. Both these rates were increased by 50 basis points in February along with a ceiling on credit in which commercial banks were told not to exceed 18 per cent of their respective loan book outstanding at the end of 2011. In a statement, the CB said strong policy measures adopted earlier this year to contain the high import demand have worked thereby arresting the imbalances that were expected to dampen pressure on the external sector.
The growth of credit obtained by the private sector from commercial banks continued to decelerate, reaching 23.5 per cent (y-o-y), by October, from a high of over 35 per cent prior to March 2012. This growth is expected to decelerate further to around 19 per cent by end 2012.
The trade deficit contracted for the second consecutive month, declining by 1.0 per cent in October 2012, and this trend is expected to continue under the current flexible exchange rate regime.
Follow @timesonlinelk
Related Posts:
Power Cuts: Colombata Kiri Apita KekiriWe are small entrepreneurs located in Dehiwela and have been coming under the continuous power cuts for the last one ...
Czech central bank cuts key rate to record low 0.05%PRAGUE, (AFP) - The Czech central bank CNB cut its key two-week interest rate by 0.2 percentage points to 0.05 ...
Lanka Ashok Leyland expects sales boost with improved liquidityLanka Ashok Leyland, following last week’s budgetary allocations to different Ministries by the Treasury, believes the liquidity in the market ...
Power cuts end as N’cholai plant is revivedPower cuts have ended, now that the Norochcholai coal power plant is back in operation and generating up to 150 ...
Credit extension fails to cheer Colombo bourseLifting of credit restrictions this week failed to cheer the Colombo share market which fell for four straight days this ...