The Monetary Board of Sri Lanka’s Central Bank will impose appropriate caps on market lending rates of individual institutions or financial institutions, if the intended reduction in market lending rates is not realized within specific timelines. Sri Lanka’s Central Bank with the expectation of reducing all market lending rates in line with the reduction already observed in deposit interest rates, will announce specific timelines and measures in consultation with the stakeholders, Central Bank Governor Dr. Indrajit Coomaraswamy said whilst addressing the media during its meeting in Colombo today (23). “Clearly a great deal has been done to relax monetary policy and that needs to be transmitted to market lending rates. That we have not seen. In addition to all the interest rate action that has been taken, there was a deposit cap placed which is reducing the financing cost of banks so that always should translate into lower lending rates.” “ What we have seen so far it has not met the expectations that the monetary board had in terms of reduction in market lending rates,” Governor added. “If monetary policy is relax the extended lending now there has to be more material impact on the lending rate we have seen so far and the Monetary Board is determine to make sure that it happens,” he added. It is vital that market lending rates are lowered by bank and non-bank financial institutions in response to their reduced cost of funds. “Clearly if monetary policies is relaxed to the extent that it has been now, there has to be more material impact on lending rates than we have seen so far and the monetary board is determine to make sure that it happens,” Coomaraswamy said.
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