COLOMBO: Sri Lanka banks have raised rates for 12 – month term deposits, which could be an early sign that credit demand may be recovering, and the economy has made a so-called ‘soft landing’, analysts say, though there has also been a spike in Treasuries yields.
In mid-March publicly traded Sampath Bank raised its 12-month fixed term deposit rate advertised online to 11.5 percent from 10.5 percent.
DFCC Bank later followed suit, raising its 12-month FD rate 50 basis points to 11.5 percent.
The larger private banks such as HNB and Commercial Banks are still offering 10.5 percent levels and state banks around 10.5 to 10.75 percent, analysts said. Most banks cut rates in the second half of 2017.
Most banks will give slightly higher ‘negotiated rates’ for large deposits.
Sri Lanka’s Treasuries yields also spiked in February following an electoral defeat by the ruling coalition in local council polls, which led to a weakening of confidence, that could be temporary, analysts say.
However the political uncertainty has cast doubts on future economic reforms especially market pricing energy, which can affect credit demand of state enterprises from banking system.
Sri Lanka’s central bank has not cut policy rates, but the effective benchmark overnight rate has fallen from the 8.75 percent ceiling rate to around 7.50 to 7.60 percent, closer to the floor 7.25 percent.
However in the last six months, private credit has been a positive 50 to 60 billion rupees a month, while outstanding credit to central government fell absolutely to 2,168 billion rupees in December from a peak of 2,254 billion in July.
