11 September 2019 12:01 am
The Central Bank plans to issue lending caps for banks with timelines this week.
“We have already made some calculations. The Monetary Board is meeting this week and will consider the proposed caps and timelines. Hopefully, we will be able to issue it this week,” Central Bank Governor, Dr. Indrajith Coomaraswamy told Mirror Business. He said depending on the nature of the lending caps, the timelines given to banks would vary. “If we were to impose a cap on primary lending rate, it will be within this year.
If we were to impose a cap on average weighted lending rates, it will be somewhat longer,” he said.
The Central Bank believes that lending caps will help to drive economic growth while resolving the current high non-performing loan (NPL) ratio in the banking sector.
“We have a challenging environment at the moment. We have inflation running at 3.2 percent, and we are projecting 3.1 percent economic growth for the year.
“Therefore, the nominal growth is likely to be around 6.5 percent for the year. In such a context, if you have lending rates 13-16 percent, it’s just not possible to conduct businesses in this country which is why the CB was working on introducing lending caps on a temporary basis,” Dr. Coomaraswamy said in an earlier occasion.