Pressure on market interest rates, non-performing loan rates has decreased:
Central Bank Report on financial system stability presented:
The Central Bank of Sri Lanka (CBSL) declares that the country’s financial system has stabilised in the first quarter of this year.
In the first quarter of this year, Sri Lanka has stabilised the country’s financial system, despite the challenges due to a number of other factors including efforts to lower the high loan interest rates in the past, increasing credit facilities for the private sector and reducing public sector borrowing, the CBSL declared.
The CBSL shall provide a report on financial system stability every year as per Section 70 (1) of the New Central Bank Act No.16 of 2023. According to the new banking law, the Central Bank presented its first stability commentary yesterday (11) and said this.
This report has revealed the risks and weaknesses in the stability of Sri Lanka’s financial system. Also, the data up to June this year is also included about the policy measures implemented by other regulatory agencies including the Central Bank.
Due to the measures taken by the Central Bank to lower the market interest rates in Sri Lanka, the loan interest rates in the banking and financial sector have decreased. Deposit interest rates are also rising. Due to the decrease in loan interest rates, there is an increase in private sector loans. Along with this, the non-performing loan ratios have also reached an even lower level.
The Sri Lankan Rupee has overvalued against the US Dollar in the first eight months of this year due to the increase in foreign remittances, tourism income and export earnings. The Central Bank is of the opinion that this situation may continue to be the same in the future.
Due to the central government’s absorption of credit facilities obtained by public enterprises from the banking sector, the pressure on market interest rates as well as non-performing loan rates has decreased.
The resilience of the financial sector has increased recently due to the domestic debt restructuring process as well as measures related to risk reduction in the banking system.Despite the challenges, the country’s economy will continue to grow and the quality of assets will increase and risk management will increase, which will lead to better financial stability, the report states. In the end, the report also states that to achieve such a situation, it depends on the extent to which the policy measures and reforms adopted by all the institutions are successfully committed.
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