Dec 11, 2009 (LBO) – Sri Lanka’s Central Bank has asked banks to sharply reduce interest rates charged on credit cards, saying they had enough room to do so as interest rates in general had fallen. The Central Bank said in November that Treasury bill yields have fallen 947 to 950 basis points at primary auctions over the past year, helped by easier monetary policy, foreign investment into Treasuries and lower inflation.
But rates have edged up again at auctions in the last two weeks as fiscal policy loosened ahead of elections early next year and private sector credit started to expand. “Banks have been requested to reduce the interest rates levied on credit cards to at least a level between 24 percent and 36 percent,” the regulator said in a statement.
The Central Bank said it has observed “with concern” that interest rates charged by licensed banks on credit cards have remained unchanged in the range of 33 percent to 48 percent since December 2008.
“It is however noted that currently there is adequate leeway for the banks to reduce such interest rates on credit cards since the interest rates structure has moved down due to the relaxation of the monetary policy.”