Lending rates of finance and leasing companies:

CB expects further reductions

The Central Bank (CB) has been easing its monetary policy since the beginning of 2009 in view of the rapid deceleration in inflation, to provide a stimulus to economic activities.

In response, money market interest rates have fallen gradually and Treasury bills yield rates have declined by over 900 basis points so far this year. Similar declines have been observed in other short-term interest rates as well.

In line with such declines, banks' deposit and lending rates too have been reduced significantly. Deposit rates of registered finance companies and borrowing rates of specialized leasing companies too have been reduced, and are expected to be reduced further, resulting in a substantial reduction in their costs of funds, a communique from the Central Bank said.

The Central Bank is of the view that there is now sufficient space for the registered finance companies and specialized leasing companies to reduce their lending rates, and accordingly the Central Bank expects those financial institutions to make a commensurate downward adjustment in lending rates, over the coming weeks.

Such a reduction would benefit entrepreneurs in industry, services and agriculture sectors, in particular, small and medium scale businesses.