CB unhappy with lending rate reductions by banks
View(s):The Central Bank (CB) on Friday issued a circular on methods to ensure that the lending rates reflect the recent Monetary Policy relaxation.
CB Governor Dr. Nandalal Weerasinghe told the media on Thursday at a post-policy review meeting that this will be done.
He said that the CB’s expectation of at least a 3 per cent reduction in interest rates by December will also be shown in these methods.
This was precipitated by the governor stressing the licensed commercial banks to take immediate measures to adequately reduce lending rates given the policy interest rate cuts last July. “We noticed that the market interest rates of certain lending products remain excessive and are not in line with the current monetary policy stance. Thus, we decided to adopt targeted measures to reduce the excessive lending interest rates. We hope the new circular would encourage banks to conform to its guidelines,” he added.
Dr. Weerasinghe, in a letter directed to the Sri Lanka Banks’ Association (SLBA) chairman, had stressed that the CB would be compelled to take administrative measures in the event the banking and financial sector fails to make adequate and expeditious adjustments in this regard.
He told media on Thursday that lending rates were not adjusted according to the deposit rate. “The lending rates did not come down as expected by us. That is why we will take administrative actions,” he said.
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