Strange Sri Lankan bank theory: Interest rates lowered only if requested

October, 17, 2014

Sri Lanka’s bank interest rates have seen a historic low now. Some banks have already lowered their housing loan interest rates to 10.5 per cent.

Overall, the current interest rate on housing loans remains at a 12 per cent level. Hence, the banks should reduce the interest rates of those who had obtained housing loans several years ago at interest rate as high as 18 per cent to match the prevailing lower interest rates.

Inquiries by revealed that certain banks have already reduced the interest on loans obtained at higher interest rates by customers to match the current rates.

However, several banks are yet to reduce these interest rates they wait to do so until and unless the customer requests for a reduction of interest.

The excuse they dole out is that since there had been an agreement entered into between the bank and the customer when obtaining the housing loan the banks are unable to reduce the interest rates unless the customer requests to do so.

If loan obtained on Floating Rate then ask for interest reduction

If you have obtained housing loans at higher Floating Rate interest from any bank then you could request the particular bank to reduce the interest on your loan to match the market rates.

Then the bank would consider the request and reduce the interest to a reasonable percentage.

While commenting on this issue, a pioneer in the monetary sector said though some banks increased their interest rates on Floating Rate loans, it is regrettable that they never considered reducing them when interest rates decreased.

The Central Bank recent had reduced interest rates and created a low interest atmosphere in Sri Lanka, inflation too has fallen to its lowest.

During an earlier instance, Central Bank Governor Ajith Nivard Cabraal had told action would be taken against banks which do not reduce their interest rates to match the lower rates of the Central Bank.

The Monetary Policy Statement of the Central Bank of Sri Lanka released today states that it is satisfied over the reduction of interest rates by the commercial banks.

However, the lowering of interest on loans obtained at floating rates earlier is as significant as to the recent loans.