CB defends equity lending restrictions
Ravi LADDUWAHETTY
The Central Bank yesterday defended its decision to get licensed
banks to limit their lending portfolios for customers buying equities.
”We are not attempting to limit market growth but only to regulate
it,” Central Bank Deputy Governor Dharma Dheerasinghe told Daily News
Business yesterday.
The Deputy Governor’s remarks come in the context of stockbrokers
expressing concerns over the limitations imposed in the lending market
and with initial public offerings amounting to Rs 20 billion.
The Central Bank does not think that brokers need to be unhappy but
it has been done as the bank does not want to inflate the system and the
Central Bank has an obligation to safeguard the interests of the
licensed banks who lend public funds, he said.
He said if the Central Bank did not impose the 50 percent restriction
to banks to lend for IPOs, then all 30 banks would be exceeding the
limits and share issues would be oversubscribed by 15 times.
Meanwhile, stockbrokers yesterday made some salient comments over the
Central Bank decision to direct licensed banks to limit the lending
portfolios to 5 percent for purchase of equities by their customers.
”Our stance has been that bringing such restrictions would curtail
the level of activity of the market specially in the light of the
Initial Public Offers valued at around Rs 20 billion which will be the
total size of the issue sizes which will come in during the course of
the year, Colombo Stockbrokers Association Chairman and Ceylinco Brokers
Director and General Manager Srian Gurusinghe said.
”There will be plenty of IPOs which will be coming this year and the
funding will be from the existing market. The market should have access
to more funds and this is also an opportunity for banks also to make
some returns on lucrative investments.
He said the stance of the brokers has been that it is the local high
networth and retail investors who drove the market in the last two years
and there have been very little inflows of foreign investment coming in.
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