While the Monetary Board of the Sri Lanka Central Bank (SLCB) has decided to retain the interest rates which in turn decide the interest rates of the commercial banks unchanged at 6.50 and 8.00 percent in July as well, it has pointed out to the commercial banks that the lending rates should be further reduced.

Since the borrowings from the banking system by the private sector in May this year has decreased by 2.2 percent when compared to May last year, the SLCB has pointed out that there are possibilities for the commercial banks to further lower their lending rates against the backdrop of a lower inflation rate.

Sri Lankan bank interest rates not being reduced even though the SLCB reduces interest rates is an issue and Sri Lanka is in the forefront as a country with a very wide interest margin is a fact pointed out to by economic analysts.

Interest margin is the percentage difference between the interests by the banks on deposits and the interest charged from the borrowers and in Hong Kong it is 1.7 percent while it prevails at 4.3 percent in Sri Lanka.

The private sector borrows more when bank interest rates dip which increases the economic activities in the country. This in turn is a major reason for economic development.

The expected development goals cannot be gained if the commercial banks do not reduce their interest rates however much the SLCB reduces its rates.

Meanwhile, ignoring of gold backed loans due to the fall in gold prices in the world market increased recently and this dealt a heavy blow to the banks in Sri Lanka.