Recovering tourism sector helps banks maintain stability, enhance liquidity

Sri Lanka’s tourism sector recovering from multiple crisis, is helping banks to maintain stability and enhance liquidity, according to First Capital Research (FCR) Chief Research & Strategy Officer Dimantha Mathew said.
He noted that tourism sector is helping banks to reduce their NPLs, which would ultimately ease the burden on the banking sector and the economy. In addition, recovery of the tourism sector has also given boost to the crisis-hit construction sector, which again shows a similar impact on NPLs.

“The tourism sector started to pay off their loans, so it will come into the performing range. We are also seeing some activity in the construction sector related to tourism such as  renovations and  refurbishments. 

“These two segments cover about 40 percent of non- performing loans in the banking sector, which will be a major boost for the banking sector and economy, because the fund flow which is stuck will start  to reactivate and iAt will support the liquidity in the system as well,” he elaborated.
He remarked that declining interest rates also made it possible for this outcome
FCR said it expects AWPLR to hover around 10-15 percent, which is quite attractive to lending. The credit growth will possibly accelerate to 7.5 percent for private sector, all which will help the banking sector. (NF)