- CB said it was to provide relief to low income persons
By Sandun A Jayasekera
The Central Bank of Sri Lanka (CBSL) has fixed the maximum annual interest rate 12 % or 1% a month for items pawned at licensed commercial banks.
It has observed that the current interest charged by licensed banks on cash advances for pawned items range from 12% to 17.5% per annum. The CB said the Monetary Board had fixed this rate having considered the need to provide relief to low income persons who pawn gold jewelry to meet their short-term financial needs because of the adverse economic situation in the wake of the COVID-19 outbreak.
A directive was issued under the Monetary Law Act to licensed commercial banks requiring to fix the maximum rate of interest to be charged by them on the money lent on the security of gold jewellery accepted as a pledge for pawning to be 12% per annum or 1% per month if the pawning period is less than one year, with effect from April 27, 2020. This maximum interest rate will be applicable for all new pawning advances and existing pawning facilities that become due for renewal commencing the date of the Order.
“Further, it is expected that other institutions involved in pawning activities will also offer a lower interest rate to enable their customers to obtain urgent finances at affordable costs so that they could later redeem their pawned gold jewelry,” the CBSL said.