Credit Upturn

Dec 04, 2010 (LBO) – Sri Lanka’s loans to private citizens from commercial banks grew 15.5 percent to 1,361.5 billion rupees in September from a year earlier while credit to government grew at a slower 6.8 percent. After contracting in 2009, credit to private business had grown 165 billion rupees.

In the month of September credit to private business grew 35.3 billion rupees almost as much as the previous month. August and September has seen the higher volume of credit being extended.

Credit to the private sector from rupee books of banks grew to 1,211.4 billion rupees from 1,172 billion rupees a month earlier, while loans from foreign currency banking units fell slightly to 150.1 billion rupees from 153.1 billion rupees a year earlier.

Faster credit growth has absorbed some of the excess reserves in the banking system that came from inflows of foreign money to the system.

In the past two months the Central Bank has been a net seller in forex markets. Sri Lanka has a tight peg with the US dollar and the central bank sells or buys dollars to maintain the peg.