Dramatic changes in the leasing business

Hiran H.Senewiratne

LEASING: Leading finance and leasing companies anticipate the current high interest rates to come down to a manageable level for the industry to come back to normalcy before the end of this year, industry sources said.

During the last three months there was a dramatic change in the leasing sector due to the increase in interest rates and also inter banking rates. This enabled people to be more speculative than previous times with the high rates and inflationary pressure.

With the change of the business situation, many companies had an overall 10 per cent drop in the sector in general.

The Central Bank is now in the process of adopting long term monetary and fiscal policies to ease out inflationary pressure and in tern would result in reducing in bank interest rates in the long-term perspective, its sources said. When the Daily News contacted industry personnel they said that high interest rates and the increase of inter banking rates have created this set back.

Janashakthi Insurance Company Limited Assistant General Manager Ravi Liyanage said there is a slight drop in the leasing industry during the last few months.

The reason for the drop in the industry was due to the interest rate change created taking a little time to clear in your mind for many clients.

Liyanage predicts the industry to come back to normal. ‘It would take three to four months, and to stabilise at least a minimum six months; he said.

According to Mercantile Leasing Limited -Brand Manager Dinesh Yogarathnam, there is an overall dip in the collection of recoveries especially among the new clients but there is no problem with the existing clientele.

He said that price of motor vehicles have gone up and the people tend to pay higher prices that it was, promoted many clients to have a second thought when it comes to the vehicle leasing business.

Yogarathnam said that depending on the government’s monetary and fiscal policies the industry would move forward. However they expect the market to come back to normal within a few months.

Asian Finance Limited Assistant General Manager Mahen Nawaratne said that most customers are suffering due to high interest rates, while the existing customers do not face any problem.

He said that their leasing recovery ratio is 100 per cent as they practise prudent leasing most of the time.

‘Leasing companies report low recoveries as they go for full financial leasing without looking at customers’ repayment capabilities, he said. Nawaratne said that their new customers are grappled with high interest rates and the industry perceives the current interest rates to go down in the future for the industry to survive.

One of the plus points due to the high interest rate was that people go for savings and invest in capital investment, he said.

Lanka Orix Finance- Recoveries Manager Manjula Nawaratne said commercial leasing sector is facing a crisis while the general leasing sector is doing well now.