May 05, 2014 (LBO) – Sri Lanka’s credit from commercial banks fell 0.9 billion rupees to 2490.7 billion rupees in February 2014 from a month earlier, the second month running that private credit has fallen in absolute terms. In January the outstanding private credit stock fell 42.7 billion rupees, the first month credit has shrunk in the wake of the latest balance of payments crisis.
There were marginal declines in both rupee and US dollar denominated loan stocks, data from the Central Bank showed.
Private credit was still up 4.4 percent in February from a year earlier, easing from 5.2 percent in January.
Following the 2008/2009 balance of payments crisis, private credit fell for eight months in a row.
Analysts says following a balance of payments crisis, which is triggered by a credit bubble, de-leveraging is a natural result as risky loans taken during the bubble period are purged and firms try to strengthen their balance sheets by reducing debt.
It is part of a standard credit or business cycle that allows