Commercial banks had increased the annualized interest rate on credit cards up to 32% from this month.

To the latest figures released by the Central bank of Sri Lanka (CBSL) the total Credit Card Outstanding Balance issued by the Banking and Financial Institutions of Sri Lanka was reported at Rs.110.27 billion, at the end of April 2019. This records an increase of Rs.2.29 billion from the previous month of Credit Card Outstanding Balance Rs.107.97 billion.

According to the latest monetary policy review, considering the high nominal and real interest rates on deposit and lending products, the central bank of Sri Lanka has imposed maximum interest rates on deposit products in April 2019, thus reducing the cost of funds of financial institutions, enabling them to reduce lending rates and enhance credit flows to the real economy.

However, In spite of liquidity injections, decline in AWCMR and yields on Government securities, as well as the recently introduced maximum interest rates on deposit products, market lending rates have failed to show any sign of commensurate downward adjustment. The report further noted.

Moreover, according to the Amidst elevated market lending rates, private sector credit contracted notably Following a higher than projected credit expansion, particularly in the latter part of 2018, credit extended to the private sector by commercial banks contracted, in absolute terms on a cumulative basis, during the first four months of 2019.

High market lending rates, sluggish growth in economic activity, subdued business confidence, as well as the settlement of arrears by the government on account of various projects which enabled repayments to the banking sector, were amongst the factors which contributed to this contraction. Driven by the slowdown in private sector credit, the year-on-year growth of broad money (M2b) also decelerated so far in 2019. The report added.