Interest rates on deposits - AER

S R Balachandran

Council member, The National Chamber of Commerce of Sri Lanka

Interest rates on deposits are quoted by finance companies on following basis:

a. Monthly and maturity payments

b. 1 month, 3 months, 12 months, ...60 months - period

c. Simple interest (SER) and annual effective rate (AER)

I am aware that AER is computed on the simple interest earned together with interest on interest basis. I quote below selected AER (monthly basis) quoted by finance companies and shall thank clarification from them

I also enclose my computation sheet for clarification.

It should be appreciated that my intention is not criticize finance companies but to obtain a clarification only.

I understand at present in accordance with the Central Bank rules and regulations deposits in registered finance companies to a limit of Rs 200,000 per person has to be guaranteed by taking proper insurance policies. I suggest that this fact must be mentioned by the finance companies in their press notifications and brochures.