Prime lending rate hits fresh high of 10.46% as CB holds policy rate

The Average Weighted Prime Lending Rate (AWPR) rose to 10.46 percent for the week ending 24 July 2026, up eight basis points from 10.38 percent a week earlier and marking the highest weekly reading since the Central Bank’s current tightening cycle began in late May. 

The rate has now climbed by more than 200 basis points from the 8.10 per cent recorded in the corresponding week last year.

The rise traces back to the Monetary Policy Board’s decision to raise the Overnight Policy Rate by a full percentage point to 8.75 per cent, effective 26 May 2026. AWPR stood at just 9.63 per cent in late April, before the hike; it climbed steadily through June, touching a then-high of 10.42 percent by mid-month, before easing slightly to around 10.38–10.39 percent through late June and much of July. This week’s eight-basis-point increase pushed the rate past that earlier peak.

Notably, the AWPR’s latest rise comes even as the Central Bank has held policy steady. At its review on 22 July, the Monetary Policy Board kept the Overnight Policy Rate unchanged at 8.75 percent, citing accelerating inflation, which climbed to 6.8 percent year-on-year in June, alongside renewed uncertainty from Middle East tensions. 

The Board said it expects the May tightening to continue moderating credit growth and pulling inflation back towards its 5 percent target over the medium term, with the next review scheduled for 30 September. That AWPR is still rising despite the pause suggests banks are continuing to reprice loans in response to tighter liquidity and higher government securities yields, rather than any fresh signal from the Central Bank itself.

Other short-term rates were comparatively stable over the week. Treasury bill yields in the primary market held broadly steady, with the 91-day yield easing slightly to 9.95 percent while the 182-day and 364-day papers stayed at 10.24 percent and 10.20 percent, respectively.

The Average Weighted Call Money Rate edged up to 9.00 percent from 8.95 percent, even as total outstanding market liquidity remained in surplus, narrowing marginally to Rs.163.07 billion from Rs.167.97 billion the previous week.

Individual banks moved in different directions. People’s Bank held its prime rate steady at 10.32 percent, while Bank of Ceylon trimmed its rate to 10.66 per cent from 10.76 percent. Commercial Bank of Ceylon and Hatton National Bank both eased, to 10.56 percent and 10.55 percent respectively, and Sampath Bank posted the sharpest reduction, falling to 11.03 percent from 11.91 percent. Despite these declines among several major lenders, the weighted average was pulled higher by elevated rates at smaller and specialised banks, including Cargills Bank at 12.80 percent and Union Bank of Colombo at 12.37 percent.

Global energy markets have added to the cost pressures banks are pricing in. Brent crude surpassed USD 100 a barrel for the first time since May, as renewed US strikes on Iran and attacks on tankers in the Red Sea compounded a supply disruption from Kazakhstan, where the Caspian Pipeline Consortium suspended loadings at its Black Sea terminal following tanker attacks.

Despite the mounting cost of credit, private sector lending has stayed resilient, expanding 27.8 percent year-on-year in May, suggesting demand has yet to be significantly dented by nearly three months of rising borrowing costs.