Credit to private sector accelerates to Rs.173bn

• Expansion brought total private sector credit for first quarter to Rs.274.6bn
• Year-on-year private sector credit grew 14.0% in March, accelerating from 12.8% in February

The licensed commercial banks have accelerated their pace of credit to the private sector in recent times, as the borrowing rates stay low while the economy picks up steam, generating demand for fresh credit from individuals and businesses.
The latest data showed that the total outstanding credit of the commercial banks increased by a whopping Rs.173.2 billion in March, up sharply from Rs.106.0 billion in February, setting off a robust growth in private sector credit for the year.
The March expansion in private sector credit brought the total credit extended in the first three months of the year to Rs.274.6 billion.
The March extension of credit translated into a robust 14.0 percent growth in the private sector from a year earlier levels, which was an acceleration from 12.8 percent through February.
The double-digit growth in credit to the private sector is strong evidence of the level of appetite for credit from both the businesses and individuals for business spending, investments and consumption.
It also shows the relaxing credit conditions in the economy and also the willingness of the banks and other financial institutions to disburse more credit into the economy after years of maintaining tight credit conditions.
This was possible from the declining borrowing costs, starting from the second half of 2023 and also the economy showing signs of stability and growth from 2024.
The economy exited two years of contraction in 2024, when it recorded a 5.0 percent growth last year.
The government expects to repeat the same growth for 2025, although the other forecasters, including the multilateral credit agencies, have somewhat conservative growth forecasts for the economy.
The confidence of the economy by its actors was further solidified by the strong inflows from key foreign income earning sources such as remittances, tourism and exports, a thing which was further reinforced by the prevailing political stability and policy consistency.
Other data also showed that the fresh credit flows into the broader segments of the economy such as agriculture, industry, services and personal loans, help a more broad-based growth in the economy.
The next and third monetary policy review is due later this month and the Monetary Policy Board is widely expected to leave the current Overnight Policy Rate unchanged, as both the prices as well as the pace of credit flows happen at desired levels.