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Last Updated : 2024-05-26 19:07:00
28 June 2023 03:30 am - 25 - {{hitsCtrl.values.hits}}
Sri Lankan banks which took little interest towards deposits when interest rates were going up appear to have suddenly woken up to aggressively cut rates on such deposits when the rates are on their way down, leaving the hapless savers devastated from still red-hot prices in the economy.
Banks have disproportionately cut their deposit rates since the announcement of 250 basis points cut in the policy rates earlier this month by the Central Bank, which signalled an ending to the tightening cycle.
However, savers were caught off guard when they were told by their banks that the rates offered for their deposits had been slashed by as much as by 600 to 800 basis points upon their renewals or for new deposits in less than 24 hours since the policy rates were brought down on June 1.
For instance, banks which have been offering up to 18 to 19 percent for the most popular one-year term deposits are now quoting 12 percent.
But the prime rate, the rate at which banks loan to their most prime and rated customers for short periods such as three months is going at 19.69 percent while the rate for others still hover at well over 20 percent.
Banks have always been playing this game when the policy interest rates in the economy move in either direction, solely to fatten their margins and thereby to make a windfall. Interest margin is what banks make from what they charge on their loans and what they pay for deposits.
Banks take longer to raise what they offer for their depositors in a tightening cycle but are quicker to cut rates when they see even a specter of an easing mode by the Central Bank. They do the opposite for lending rates in these cycles to make the most money during this interim period until the rates settle.
But this time the banks appear to have become more ruthless as seen from the extent to which they have cut deposit rates in the shortest time compared to the cut in key rates as opposed to the reduction in lending rates to make the most amount of money even without extending fresh credit.
The process which is known as re-pricing assets and liabilities is a common practice to reflect the risk and the appetite for liquidity in the system.
But the process has left savers devastated as they see their deposit incomes crater while the prices of goods and services they consume still remain at exponential levels despite the sharp deceleration in inflation rate due to base effects.
Sri Lanka lacks market oversight and anti-trust authorities to police and take action against unfair trade practices.
Christo255 Wednesday, 28 June 2023 08:29 AM
Totally agree. Banks must not be shylocks
kudson Wednesday, 28 June 2023 08:52 AM
appointmentt a commission to investigate along with the capacity to audit accounts of complaining account holders then prosecute them on criminal charges HNB kotahena no breathing space all machines are next to each other leading to violence no deposit slips security decides on who should get slips whilst blaming the management for the shortage security is alcoholics
Jayantha Wednesday, 28 June 2023 08:54 AM
Avoid taking loans as much as possible. Most of the people who have taken loans are paying now with extra interest rates and further struggling. Avoid banks and leasing companies at all cost for loans. We have a very weak opposition leader with low intelligence level. So he is not doing anything at all.
Harin Fernando Wednesday, 28 June 2023 08:59 AM
This is one of the ways banks will make profits and build its capital back, once it reports hefty losses due to the domestic debt restructuring. We can't blame the banks.
Senior citizens Wednesday, 28 June 2023 09:00 AM
How can senior citizens live off their hard earned deposits ? We need to pay rent and buy medicines and move around in a tuk .... please help us to live decently in the last days of our life ..
Senior citizen Wednesday, 28 June 2023 09:09 AM
Please, please help us by increasing FD rates for Senior Citizens ... we old folk are suffering...
Truth Wednesday, 28 June 2023 09:23 AM
I don't see a difference in the attitude of Banks and Insurance Firms selling their products as Investments. People loosing their hard earned money in Insurance Companies is very common these days. Agents are trained by them to build a relation with the prospective customer with very little knowledge on the product they sell. The contents of the Policy document will not confirm with the Agents verbal promise in most cases.
Are you sure Wednesday, 28 June 2023 09:47 AM
Is it an unfair practice to reduce the interest drastically? I am not sure. I doubt it.
zeereez Wednesday, 28 June 2023 09:55 AM
This is why Interest is prohibited and Trading is encouraged. Now we see how dirty the Banks are, squeezing the borrowers by being ruthless and making money by lending money, this is called 'Gini Poli" .
bande Wednesday, 28 June 2023 10:10 AM
Banks have already build up their cash flows by taking advantage with sudden drop of statutory rates. Any eventuality of cashflows due to bond restructuring has already been covered up. Thats the business model bank follow. Depositors should be smart enough to understand It and manage their deposits. I fully agree that Senior citizens should be compensated .
Imtias Wednesday, 28 June 2023 10:21 AM
Money is not the ideal form of media for transactions of all sorts in the modern world. This is a very primitive method. In actual form money has no value at all just pieces of paper or pieces of metal. With the development AI the concept of money will soon disappear all the current problems with money will vanish.
Tariq Wednesday, 28 June 2023 10:27 AM
Totally agree. Sri Lanka doesn't have even an Anti Competition Agency
Lion Wednesday, 28 June 2023 10:38 AM
While thanking of publishing this issue which has devastated ,specially the senior citizens who lives on bank interest as they can’t cope up with the prices of commodities in the market. On top of that 5% charge on interest From January this year is a crime perpetrated on the poor senior citizens by the government . Editor please highlight this issue which is very unjustifiable.
Hesh Wednesday, 28 June 2023 11:06 AM
Learn about supply and demand first. If people stop taking loans for things they can't afford then lending rates come down automatically.
Sam Wednesday, 28 June 2023 11:16 AM
The banks are about to be told they will not receive any money they lent to the government (half of which was mis-used or stolen). The banks will in turn now reclaim this from us one way or another. Thanks government, you are so kind. Keep up the good work.
Karalasingam Sivalingam Wednesday, 28 June 2023 11:23 AM
We depend on our final settlement payments deposited in Banks for reasonable interest, reducing the interest rates of senior citizens is not acceptable. At least reduce the price medicines and consumables.
Neo Wednesday, 28 June 2023 02:39 PM
Government can't reduce price of medicine since they don't manufacture it. Also government can't increase interest for just a section of the population, that means other people are funding the increase of interest, not the government. Why can't we learn to earn and live?
lanka shantha Wednesday, 28 June 2023 12:12 PM
Essential goods Price remains high. Central bank says LK rupees is strong against US dollar. Banks reduce fixed rates to 11% So how elders will survive with half the earning for their interests.
Aruna Lakmal Wednesday, 28 June 2023 03:38 PM
Peoples bank has increased their loan interest by another 3% with effect from 1st May 2023 for who have got loans on fixed rates. That is how "Jana Hada Handunana" bank is playing with us on the other hand written off big amount as bad debts of politicians.
DISGUSTED SENIOR CITIZEN Wednesday, 28 June 2023 04:08 PM
If the Senior Citizens interest rates are not increased to meet our expenses, we too will take to the streets ...
Sam Silva Wednesday, 28 June 2023 06:15 PM
Sorry to say that even if you take to the street or top of a mountain nothing will happen. But if all depositors take all the money out from their accounts there will some impact.
dara Wednesday, 28 June 2023 05:03 PM
Country ruled by rajapakshas and now wickramasinha, their corrupt administration and stupidity made country bankrupt,people no way part and parcel of their dirty game,it’s totally unfair hurting public, but if it’s so necessary why don’t recollect swindle money from central bank after produce swindlers to courts beside that they should take steps to bring back unusually big plunder by rajapaksha clan,this could subdue burning anger of public against government
Rasika Sudarshana Wednesday, 28 June 2023 06:08 PM
This is a true fact of almost all sectors and all the business operators of Sri Lanka. They are taking the advantage of weak government , passive customers who take anything with smile. Most of western economic theories is not working in Sri Lanka thereby market oriented price making is also not working in Sri Lanka due to poor information flow and less financial literaturacy in the economy. I wonder when Sri Lankan can see a bright future if these weak governance and passive customers who take anything as good and surrender their all money to the blood suckers
N V Jen Wednesday, 28 June 2023 11:53 PM
Banks make humongous profits on deposit and lending rate difference. Central bank should intervene to ensure that the gap between both rates should not exceed 3-4% when lending to any sector.
Rex Jarkie Thursday, 29 June 2023 05:45 AM
Please, please help us by increasing FD rates for Senior Citizens ... we old folk only income for non pensioner's on the onlym FD with the banks are suffering in always doctors charges test charges medicine cost all gone up that all rogue still in power and enjoying themselves at our expenses
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