Sri Lanka credit will grow faster if long-term rates fall: Deputy Central Bank Governor

June 17, 2014 (LBO) – Sri Lanka credit growth will accelerate if longer term lending rates fall further, Deputy Governor Nandalal Weerasinghe said. Sri Lanka’s inflation in the past 12-months have been in the lower single digits, though inflation spiked to near 10 percent in 2012, amid steep currency depreciation.

Central Bank Governor Nivard Cabraal told the business forum inflation was expected to stay at these levels in the ‘foreseeable’ future.

The Central Bank’s monthly policy rate announcement is expected Wednesday.

“Short term rates have adjusted to a certain extent, especially for prime customers,” Weerasinghe said in the sideline of business forum on pensions organized by Citibank.

“Treasury bills, money rates all have adjusted. But long term rates, especially for housing and SME loans are still too high.

Weerasinghe said long term interest margins are still high. Deposit rates were around 7 and 8 percent but banks were still lending around 16 to 17 or even 18 percent.

“That is still too high. Long term rates have to come down,” Weerasinghe said. “That is why there is no credit demand.”

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