Commercial banks seek CB relief on 12 per cent interest move
The Sri Lanka Banks’ Association is urging the Central Bank (CB) and the Treasury to extend a scheme applicable to state banks to cover losses in paying high interest rates to senior citizens, to all banks.
The association has made the request in writing to the CB. In the 2015 budget, state banks have been instructed to offer a 12 per cent annual interest rate for deposits of pensioners and elders. To cover any deficit between lending and borrowing rates, the Treasury is to float a $30 billion bond issue at 12 per cent interest in which state banks can invest.
The association says this facility should be availed to private banks too, banking sources said. In this context, the CB has scheduled a meeting with commercial banks this week to discuss the request and some other options. According to banking sources, one plan is to reduce or scrap the Statutory Reserve Requirement (SRR) which is the proportion of rupee deposits that banks are required to maintain with CB as a deposit. Last July the CB reduced the banks’ SRR by two per cent to bring it to 6 per cent in a bid to curtail the expanding trade deficit and depleting reserves, the CB said at the time.