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Reduce interest rates, Choksy urges banks

Finance Minister, K. N. Choksy presided over a conference on Monday of the Chief Executives of Commercial Banks and officials of the Central Bank to secure agreement by the banks to reduce interest rates on lending to the private, commercial and industrial sector.

The Minister stated that the cornerstone of the Government's economic policy was to encourage private sector led development of the economy. Reduction of the cost of finance was essential for this purpose. The Minister pointed out that although corporate taxation had been reduced, the 20% surcharge on income tax abolished and the Central Bank interest rates reduced twice this year, nevertheless, the Commercial Banks had not made any significant decrease in their average weighted lending rates. Further the banks had recorded substantial increases of their profits last year over the previous years. The medium and smallscale industries were in particular adversely affected by the prevailing higher rates of interest.

Deputy Minister of Finance, Bandula Gunawardena observed that the savings made by the banks by reducing the rates of interest paid on deposits should be diverted at least in part to cushion lending rates, particularly to smallscale, regional industries.

The Chief Executives of the banks while responding that they would favourably consider the request pointed out that they were affected by the high cost of maintenance of modern technology required today in the banking sector. They also pointed out that the high percentage of non-performing loans also added to the cost of money.

The bankers undertook to make their decision known to the Ministry of Finance through the Central Bank by Friday.

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