Central Bank upbeat about private sector credit growth

The Central Bank remains optimistic about an uptick in private sector credit growth, despite it not yet reaching desired levels. Officials believe the pace of growth will improve as the economy recovers and credit conditions ease, along with a reduction in interest rates.

While the growth in credit to the private sector has been consistently positive since June of last year, the Central Bank expressed some dissatisfaction with its speed thus far in 2024. January's figures were an exception, due to an unusual fluctuation.

The Central Bank noted a significant decline in market lending rates, particularly for shorter tenures, but suggested that long-term rates still have room for downward adjustment. The financial regulator expressed satisfaction with the prime lending rate, which has dropped to 9.68 percent, down from 12.13 percent at the start of the year. This decrease has contributed to increased credit flows to prime customers for shorter durations.

According to Central Bank data, banks are currently extending Rs.40-Rs.50 billion in credit on average under the prime rate, including daily roll-over loans and loans maturing within a week.