21 March 2011

Sri Lanka Credit Counselling Centre Sees Lower Loan Defaults with Reduction in Interest Rates

21st March 2011, www.dailynews.lk, By Charumini de Silva

Sri Lanka’s Credit Counselling Centre said that the amount of default loans have come down with the reduction of interest rates in the country.

With the reduction of interest rates, financial discipline and credit facilities becoming more affordable to the public the non-performing loans (NPL) have come down.

As a result, the businesses and the circulation of money in the country have increased commendably, Credit Counselling Centre Head Siromi Wickramasinghe told Daily News Business.

Having seen the financial reports of the corporate sector, the businesses have gained impressive improvements in their profitability and turnovers thus enhancing the repayment of loans they have taken from banks, Wickramasinghe said.

She said majority of the default customers are credit cardholders and the common reason for their default is that they do not fully understand the concept of the credit card. The financial knowledge is a key component of an economy. Due to the lack of financial education the public get into trouble and it could lead the entire financial system down a negative path.

Many borrowers default payments because they do not realize the financial concept of the products, she said.

The other reasons for defaults are due to loss of employment, bankruptcy and low income levels of the businesses. However, most of these types of defaults are temporary and are restored after the difficult period is over.

“At the Credit Counselling Centre we educate the customers and help them come back into the proper financial system. We discuss the difficulty of the default customer and thereafter the financial institutions take over the matter.

The Credit Counselling Centre also provides information to the financial institutions to look at the customer and the situation in a fresh manner.

There is always a chance for the facility to be rescheduled and restructured in order to get the consumers back into the financial mainstream,” Wickramasinghe said.

She said since the establishment of the Credit counselling Centre in 2009, the centre has spoken to over 4,000 individuals up to now.

The Credit Information Bureau’s (CRIB) performance in reporting both good and bad of the individuals is noteworthy. The entire banking system is encouraging the default customers to get back into the financial system. The banks are interested in money and not the property of individuals.

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