Sri Lanka’s deposit rates further declined in November in response to continuous decline in lending rates.
The average weighted deposit rate or the average rate offered by licensed commercial banks for their entire deposit base fell by 22 basis points (bps) to 6.01 percent by end-November, taking the total decline in the rate to 219 bps or 2.19 percent in the eleven months.
Meanwhile, the average new deposit rate or the average rate offered by the banks for their deposits raised in the most recent period, fell by 379 bps or 3.79 percent to 5.10 percent by end-October, based on the data available for the ten months.
The Central Bank expressed concerns over the pace at which the deposit rates were coming down. But fall in deposit rates hasn’t been disproportionate to the fall in the lending rates.
According to some analysts, Central Bank shouldn’t worry much about the deposit rates as once the full effects of the monetary easing measures are passed on to the real economy, as it is happening now, that will generate a virtuous cycle of lower borrowing costs, higher investments, more high paying jobs, higher incomes, and higher living standards.
The Central Bank recently said it is high time for Sri Lanka to get used to a low interest rates environment. But at the same breath they said they would incentivise the system to come up with alternative pension products such as annuity schemes, to support those who depend solely on their life savings.
For this, banks will be encouraged to test their innovative spirits to come up with new products.
Capital market developments, with necessary safeguards to protect the mom-and-pop investor interests, are also in the pipeline.
Further, the budget 2021 proposed to introduce a contributory pension scheme for people engaged in the private sector as well as those who are self-employed, to be made available at the age of 65 years.