Private sector credit sets new monthly record

• October sees Rs.246bn in new credit

The credit extended to the private sector by the licensed commercial banks has continued to set monthly records in recent times, driven by the sustained demand amid a prevailing low-interest-rate environment. 

The banks witnessed their outstanding private sector credit rise by a significant Rs.246.1 billion in October, surpassing the previous record set just a month prior in September, which stood at Rs.236.3 billion.

The record-breaking performance in October propelled the cumulative credit to the private sector during the first 10 months of the year to an unprecedented Rs.1,610.4 billion, reflecting a robust year-on-year growth of 24.1 percent. Consequently, the Central Bank, at its final monetary policy review for the year in November, maintained its key overnight policy rate unchanged at 7.75 percent. The regulator opted to hold the rates steady to avoid fuelling further credit expansion, which could otherwise threaten the price and external sector stability.

This policy stance was adopted prior to the recent floods that wreaked havoc across several parts of the country. Furthermore, earlier in November, the Central Bank moved to tighten credit for vehicle purchases by reducing the permissible financing share. 

The regulator observed that the credit flows toward vehicles were accelerating at a pace deemed unsustainable on multiple fronts. The October credit data stands as the final reading before this new directive came into effect last month.