Regulatory Alerts2019-09-24 | Monetary Law Act Order No. 2 of 2019Enhancing Efficiency of the Transmission of Recent Policy Decisions to Rupee Denominated Market Lending Rates
The Central Bank of Sri Lanka mandates Licensed Commercial and Specialised Banks to reduce annual nominal interest rates on Rupee-denominated loans by at least 200 basis points by October 15, 2019, while imposing specific maximum caps for credit card advances (28%), temporary overdrafts (24%), and penal interest (400 basis points). Banks must also decrease their weekly Average Weighted Prime Lending Rate by at least 250 basis points by December 27, 2019, with exemptions granted for fixed-term contracts, deposit-collateralized loans, and government-supported refinancing schemes. These binding rate reductions aim to eliminate transmission lags and ensure faster, equitable cost-of-fund savings are passed on to borrowers.
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