Private sector credit up by 35%

Ramani Kangaraarachchi

Sri Lanka’s private sector credit grew at an unusually high rate of 35 percent in 2011 and it is still continuing. Central Bank Deputy Governor C Premaratne said at the inauguration of the international seminar on Credit Evaluation and Risk Analysis at the Centre for Banking studies in Rajagiriya yesterday.

She said credit growth in some banks amounts to over 40 percent and this is driven by high demand for credit influenced by high economic growth, relaxed monitory policies coupled with low interest rates and availability of high liquidity.

However, in the context of excessively high demand for credit, financial institutions have to ensure, quality of assets or that credit is in high standard, concentration risks are minimal, proper diversification of portfolio, credit assessment techniques are adequate, post monitoring efforts are strengthened and avert possibilities of developing credit bubbles.

She said it is essential to keep abreast of the markets and risks that are taking place globally and locally and watch the world and environment carefully despite immense challenges in this area. In order to minimize credit risks understanding complex, innovating new products, conducting effective reviews and monitoring processes are very vital.

Premaratne assured that as regulators and policy makers the Central Bank will reinforce market discipline through implementing sound regulatory framework, ensuring reliable buffers in the system and with strong oversight while implementing a appropriate policy mix to achieve stability in the financial sector and macro economy.

Representatives from seven neighbour countries participated at the five-day seminar and two resource persons from NIBM Pune India Prof Vikas Srivastava and Prof Taseneem Chechalawala were present.