Sri Lanka’s Central Bank removes 5 pct- policy rate as credit picked up

Mar 03, 2015 (LBO) – Sri Lanka Central Bank removed 5.0 percent Standing Deposit Facility rate, given the signs of sustained increase in credit flows to the private sector, the regulator said in a statement. Private sector credit growth picked up towards the latter part of 2014 recording an increase of 223.9 billion rupees in 2014 and recorded a 76 billion rupees during the month of December 2014.

The bank says the rate removal would help to stabilise overnight interest rates within the policy rate corridor of the Central Bank.

The 5.0 percent window was sealed from Monday with the direction going to the market Friday.

The full statement reproduced below :-

In September 2014, the Central Bank rationalised the access to the Standing Deposit Facility (SDF) of the Central Bank with a view to encourage commercial banks to utilise the substantially high amount of excess liquidity prevailing in the market to enhance credit flows to the private sector at reasonable interest rates.

Consequent to the rationalisation of the SDF, overnight interest rates fell below the policy rate corridor, and the special SDF rate of 5 per cent became the effective floor for overnight money market rat