Jan 15, 2013 (LBO) – Sri Lanka’s commercial banks loaned 24.1 billion rupees to business in November 2012, with the state also borrowing another 18.8 billion rupees, official data showed. A balance of payments crisis is triggered in the monetary system by injecting large volumes of central bank credit (printed money) in the banking system which pushes credit and imports to unsustainable levels.
Analysts say as long as bank loan money raised through deposits and loan repayments, the exchange rate remains fixed.
Total credit to state and business rose from around 40 to 60 billion rupees before sterilized interventions began to over 100 billion rupees a month when forex sales were sterilized.
Credit peaked at 140.9 billion rupees in February when rates were raised and the currency floated
Update II Credit to private business rose 20.7 percent to 2,348.5 billion rupees in November 2012 from a year earlier, Central Bank data showed.
Rupee denominated loans rose 25.8 billion rupees to 2,157.8 billion rupees while loans from dollar books fell to 190.7 billion rupees from 192.5 billion rupees in October.