Central Bank warns banks who fail to reduce lending rates
The Central Bank of Sri Lanka today (06) warned that it will be compelled to take regulatory action against banks and financial institutions if they do not reduce lending rates as desired by the Central Bank soon.
“Financial institutions are urged to reduce lending rates without further delay, failing which, the Central Bank will be compelled to take appropriate regulatory action to bring down market lending rates,” it said in a press release.
This was after the Bank said it noted with disappointment that market lending rates have not declined in line with the series of measures it has taken to ease monetary policy and monetary conditions during the year.
Furthermore, the Central Bank also decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 5.50 per cent and 6.50 per cent, respectively, effective from the close of business today (6).
“The Board arrived at this decision considering the necessity to further support the economy to weather the adverse economic impact caused by the COVID-19 pandemic, given subdued inflationary pressures.”
With this decision, policy interest rates of the Central Bank have been reduced by 150 basis points thus far in 2020, in addition to the other measures taken to ease monetary conditions in the market.
The new rates are as follows:
Standing Deposit Facility Rate (SDFR) – 5.50%
Standing Lending Facility Rate (SLFR) – 6.50%
Bank Rate – 9.50%
Statutory Reserve Ratio (SRR) – 4.00% (unchanged)