The Central Bank will be introducing priority sector lending targets for the micro, small and medium scale enterprises (MSMEs) to support a broad based economic revival, in consultation with the banking community, Chandranath Amarasekara, Director of Economic Research at the Central Bank said yesterday (19).

" Priority sector lending targets for micro, small and medium scale enterprises will be introduced in consultation with the banking community. This has been approved  in principle by the Monetary Board and we will have further discussions with the banking community before introducing these lending targets," he said.

Meanwhile, responding to a query on the progress of developing new financial products to support the vulnerable segments in the society, Amarasekara expressed the following;

"In the Road Map, the Governor mentioned that there is a need for the financial markets to come up with new financial products to support this segment of the population, particularly senior citizens who depend on interest income of banks. There is a large segment of the population in the absence of nationwide contributory pension scheme, who depend on interest income on fixed deposits. What we have seen in the past is whenever interest rates come down, this segment of the population is affected. There is a lot of noise and the banks, the financial sectors, including insurance companies and so on, they also start developing similar products to address this issue. But, when interest rates trend upwards all those efforts are forgotten. That is exactly what has happened in Sri Lanka at the moment."

"At the same time, there is this Government interest subsidy scheme, with an interest rate of 15%. But, if you look at other domestic  interest rates again what we see is that, 15% interest rate on any deposit at the moment is probably higher than what they should be. This is a social issue on one hand, at the same time this is an issue for the financial sector. That is what we are trying to resolve and there will be discussions with the financial sector on this. At the same time the financial sector also should come up with their own products to serve this segment of the population better."