State Banks Lower Interest Rates in Sri Lanka on Loans to Customers to a Minimum of 8% and a Maximum of 12% from Today

28th October 2009, www.dailynews.lk, By Sanjeevi Jayasuriya

All State banks will bring down their interest rates on loans granted to customers to a minimum of eight percent and a maximum of 12 percent with effect from today.

Following the Central Bank’s reduction of interest rates to very low level of 3-4 percent and having stability in the interest rates, the country’s economic revival should accelerate.

The banking system will move to a low interest rate regime, Finance Ministry Secretary Dr. P.B. Jayasundara told theDaily News.

The Central Bank policy rate 7 percent will be a benchmark in the short-term interest rates to medium-term where Treasury Bills and Treasury Bonds rate would decline and the lending in other sectors will be in line with the reduced interest rates, he said.

The activities of the State banks were reviewed and instructions were given to the bank heads by President Mahinda Rajapaksa at a meeting held yesterday, at Temple Trees, Colombo.

The State banks will offer development oriented interest rates in the range of 8 to 12 percent in line with inflation.

The lending will be mainly for housing. The State banks will lend to public servants and the entire pending loan applications will be accommodated and would be cleared by mid December.

The State banks have the liquidity and they are in a position to do this due to 500 million bond issue that cleared the outstanding loans by the Government. The priority will be given to sectors such as agriculture, tourism, construction, livestock, fisheries and small and medium scale enterprises and these sectors will benefit under the low interest regime, he said.

The banks have funds to lend and help economic revival and provide stimulus to overall economic activities.

An outcome of the meeting was the suspension of the penal rate imposed on the non-performing loans. The removal of the penal rates would bring down cost of funds. Low interest rates would also apply to the outstanding balances of the existing loans, he said.

Banks are expected to notify customers about the amended loan installments due from them in terms of the reduced interest rates.

The President also decided to convene another meeting before November 30 to review the progress achieved in implementing the decisions taken at yesterday’s meeting.

State Revenue and Finance Minister Ranjith Siyambalapitiya, Secretary to the President Lalith Weeratunga, Treasury Secretary Dr. P.B. Jayasundera, Chairmen of all State banks and several other senior officials attended the meeting.