Slash in interest rates: Window of opportunity for growth

Consequent to the reduction in the interest rates, the Bank of Ceylon is of the view that this creates a window of opportunities for a considerable growth in the business volumes specially in the areas of agriculture, SME, fisheries, animal husbandry and housing where there is much potential for growth in the country and, as a spill-over effect, improve the quality of loans.

The borrowers who are in non performing status mainly due to the higher interest regime will now have a great opportunity to turn them into performing loans, Bank of Ceylon Chairman Dr. Gamini Wickramasinghe said in a press release.

The reduction in rates and withdrawal of penal rates will improve repayment capacity of borrowers and encourage them to get rid of long overdue debts. There will be two way effect to the bank's performance through this low interest regime- reversal of provisions and recovery of interest on already non-performing loans while the recovery of debts will improve cash flows and credit quality ratios.

The enhanced lending volumes could make the bank sustain its profitability notwithstanding to the lower interest margins.

The bank has taken positive steps to grasp this opportunity to leverage its current sound liquidity strength and the distribution capability and move with optimism to 2010.

The bank also will explore every opportunity to capitalize this low interest regime to support boosting the post war economy. The volumes could make the bank more efficient, Dr. Wickramasinghe said.