The Central Bank of Sri Lanka (CBSL) has issued an Order reducing the interest rates on lending products of all licensed commercial banks (LCBs) and licensed specialized banks (LSBs) with effect from August 25.

Accordingly, the interest rates on pawning facilities, pre-arranged temporary overdrafts, credit card advances, and new and existing LKR-denominated lending products are also reduced adequately.

This was mentioned in the Order issued by the CBSL on the maximum interest rates on Sri Lanka Rupee (LKR) denominated lending products.

In the recent past, the CBSL adopted several policy measures such as reduction of policy interest rates and the statutory reserve ratio, thereby facilitating a reduction in market interest rates.

Yet, despite the considerable easing of monetary conditions, the CBSL said interest rates on lending products of certain financial institutions continued to remain excessive and are not in line with the current monetary policy stance, posing challenges for individuals and businesses.

Accordingly, the CBSL’s Monetary Board issued an Order on the interest rates applicable on LKR-denominated lending products of licensed banks, directing them to reduce pawning facilities to 18% per annum, pre-arranged temporary overdrafts to 23% per annum and credit card advances to 28% per annum commencing the next billing cycle.

The CBSL has directed all licensed banks to reduce the annual nominal interest rates applicable for all new and existing LKR-denominated lending products, excluding credit card facilities and any other categories of lending products by at least 250 points by October 31, 2023 and further 100 basis points by December 31, 2023 in comparison to the interest rates that prevailed as at July 31, 2023.

However, if the annual nominal interest rate applicable to any LKR-denominated lending products as at August 25, or anytime thereafter is 13.5% or lower, the CBSL said it is not mandatory to give effect to the reduction required.

Further, in the cases where the applicable annual nominal interest rate as at the date of this Order or anytime thereafter is 13.5% or less, the licensed banks are not supposed to increase the interest rates of such lending products from the level maintained as at August 25.

source adaderana