PFI margin up

The Central Bank has agreed to increase the intermediation margin for financial institutions for on-lending money to tsunami affected small businesses. The Central Bank has agreed to increase the intermediation margin for financial institutions for on-lending money to tsunami affected small businesses. The Bank earlier said commercial banks would get 1 percent for intermediation cost for customer loans to be given at 6 percent interest.

“We have earlier agreed to give the PFI’s a margin of 1 percentage points. But having considered their views we have decided to increase the margin to 3 percentage points,” says Rose Cooray, Assistant to the Governor, Central Bank.

Commercial banks here have been criticized for maintaining high spreads to cover their high intermediation costs and dud loans.

Up to Rs. 150 million will be added to financial sector incomes every year as a result of the 3 percent spread being allowed by the Central Bank.

The Central Bank says Rs. 5 billion will be available for on lending to small and medium sized businesses under the scheme.

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