Banks welcome CB directive on single borrowing limits

Hiran H.Senewiratne

DIRECTIVE: The Central Bank has issued a new directive to all banks in the country with regard to single borrowing limits.

It has been described as prudential requirements for banks.

Many leading commercial banks welcome the move, which they expect would enhance lending in the country, industry sources said.

One of the policy measures proposed in the monetary financial sector policies for 2007 and beyond, announced by the Bank in January is to issue new prudential requirements on single borrowing limits of licensed banks with the objective of managing risk, sources said.

Sampath Bank Managing Director Anil Amarasooriya said it is good for the entire banking sector, which will create a level-playing field between foreign and local banks in the country.

He said local banks could lend more than 30 per cent based on the capital and the reserves of the banks.

If a group, the banks could lend up to 33 per cent in infrastructure projects and could borrow 50 per cent subject to Central Bank regulations and give preference to the respective banks.

Commercial Bank- Senior Deputy General Manager (Finance and Planning) Ranjith Samaranayake said based on the credit situation and capital adequacy, this would increase lending capacity in banks to groups and individuals. Hatton National Bank sources said it would enhance the lending in banks based on the preference of the banks.

He said infrastructure projects would benefit in a greater way.

This prudential requirement for banks is mentioned in the Banking Act of the country.