Credit to private sector on a tear

• November private credit soars by Rs. 263bn; annual growth hits 26%

Credit flows to the economy accelerated with renewed vigour in November, with disbursements reaching a new high and extending a months-long record-breaking streak that began in mid-2025. 

The latest data reveals that licensed commercial banks expanded their total outstanding private sector credit by a substantial Rs. 262.6 billion during the month, setting a fresh monthly record surpassing the Rs. 246.1 billion recorded in October.

This surge has pushed the cumulative credit for the first eleven months to a staggering Rs. 1,873.0 billion, reflecting a faster 26.0 percent growth compared to a year ago. This represents a significant acceleration from the already robust 24.1 percent growth observed through October. 

Typically, private credit flows tend to gain momentum during the final months of the year as importers and traders borrow to stock up for the festive season. However, the current trajectory suggests a combination of this seasonal demand and an aggressive ramping up of credit by banks in response to the lower interest rate environment.

Nevertheless, the Central Bank may view a sustained 26.0 percent year-on-year growth in private sector credit with caution, as such rapid expansion is unlikely to be healthy for overall economic stability and inflation management. Unveiling its medium-term policies for 2026 and beyond last week, the regulator reiterated that it would continue to adopt a data-dependent approach to monetary policy. Consequently, when the Monetary Policy Board meets at the end of this month for its first rate determination of the year, it is widely expected to maintain the status quo.

While there could be some uptick in interest rates towards the second half of the year, it is not expected to be detrimental to credit flows. In the interim, the Average Weighted Prime Lending Rate (AWPLR)—the price at which short-term loans to the private sector are granted—has edged up over the last couple of weeks to reach 9.19 percent. Notably, by the time markets closed on Friday, the benchmark lending rate stood 45 basis points higher than it was a year ago.