Wednesday, December 22, 2010

A Steep Upsurge in Business for Commercial Banks

Commercial Banks in Sri Lanka have registered an upsurge in business in the recent months. In the month of October alone these banks have provided new loans amounting to Rs. 50 Billion, which registers a 20% increase over the same period last year.
Loans from foreign exchange banking units have increased by Rs. 5.2 billion to Rs. 156.3 billion.

However, loans to the government from the banking system, including the central bank, have fallen steeply by Rs. 36.6 billion to Rs. 565.5 billion as the government repaid credit following a billion dollar sovereign debt sale.

Credit from the Central Bank to government has also fallen by Rs. 15 billion to Rs. 85 billion.

Last year, loans to private business contracted as the government ran a deficit of around 10% of gross domestic product and banks bought risk free Treasury bills instead of lending to risky private business. Financial sources said that following a balance of payments crisis in 2008 and 2009, banks curtailed credit and were facing rising bad loans. Central bank data indicates that bad loans were now falling appreciably.

With many incentives and concessions given to the private sector in the new budget potential for banks to increase businesses, especially their lending portfolios have increased and business analysts comment that banks have every possibility of getting further strengthened in the future months.(niz).

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