The Central Bank requested financial institutions to not speculate and cause panic in the financial markets while passing on the benefits of lower lending rates after the bank decided to reduce policy interest rates by 25 basis points and the Statutory Reserve Ratio by 1.00 percentage point as a proactive measure to urgently support economic activity with the rapid global spread of the COVID-19 pandemic.

“The action taken by the Monetary Board yesterday will complement the measures that are already in place to revive economic activity, by inducing a further reduction in market lending rates and boosting liquidity conditions in the domestic money market. We have requested all financial institutions led by licensed commercial banks to pass to the market the full benefit of the cumulative reduction of 75 basis points in policy interest rates thus far during the year as well as the reduced cost of funds through the reduction in SRR without any delay, to ensure that those who are in need of urgent support receive the required timely assistance. It is good for financial institutions to keep in mind that the revival of business activity in the country is to their own self-interest,” the Central Bank Governor Prof W D Lakshman said.

“We have also requested financial institutions to refrain from engaging in speculative activity which could lead to panic in the financial market,” Lakshman added.

The Governor further noted that the Central Bank will closely monitor global and domestic market developments and take further policy, regulatory and operational actions as necessary.

“We are closely monitoring global and domestic market developments, and further measures will be taken as necessary to mitigate the economic impact of the pandemic, he said.

Speaking further he noted that the CBSL is working closely with the government to ensure coordinated fiscal and monetary policy responses to mitigate the economic impact of the pandemic.

He also added that, the well tested business continuity arrangements of the Central Bank will be triggered as and when required to prevent any disruption to cash and electronic transactions of the general public and ensure the timely settlement of liabilities of the government and the Central Bank.

At an urgent meeting to review the monetary policy stance of the Central Bank of Sri Lanka on 16 March 2020, the Monetary Board decided to reduce policy interest rates by 25 basis points and the Statutory Reserve Ratio by 1.00 percentage point. This decision was taken as a proactive measure to urgently support economic activity with the rapid global spread of the COVID-19 pandemic and its possible further spread in Sri Lanka.