Daily Lankadeepa E-Paper

Private sector credit gains momentum in June adding hopes for quick economic revival

„June credit expands by Rs.83.4bn, up from Rs.55.6bn in May and Rs.57.7bn in April „Private credit in first half hits Rs.414bn; surpasses private credit in entirety of 2020

The growth in private sector credit continued its robust spell with added vigour in June, broadly reflecting the continuous appetite for low-cost credit in the economy as banks have demonstrated utmost willingness to keep their lending taps wide open.

Defying the wider expectations for more modest growth in private sector credit in June due to a month long lockdown, licensed commercial banks expanded their total outstanding credit to the private sector by a robust Rs.83.4 billion, up from Rs.55.6 billion in May and Rs.57.7 billion in April.

With the credit expansion in June, Sri Lanka’s banks have extended Rs.414 billion in private credit in the first half, eclipsing the total amount of private sector credit extended during the entirety of 2020, and surpassing more than half of the target set for the full year.

The Central Bank in May tempered its growth expectations for private sector credit to 12 percent on a year-on-year basis— which works out to Rs.750 billion in fresh credit— from an earlier 14 percent (Rs.865 billion), as virus restrictions were biting into the momentum of the economy set off in the first quarter of the year.

However, Central Bank officials were more upbeat by early July from the preliminary credit data seen by them and the positivity returning after the lockdowns that ended on June 21.

The June credit translated into a robust 13.3 percent growth from the same month in 2020.

They at one point in early July suggested fresh private sector credit of around Rs.800 billion for the year as the early data pointed to a strong momentum.

Banks have also shown ample evidence for their readiness to unleash excess liquidity by way of loans to everything from big projects to small businesses, housing and consumption, as they built an enormous deposit pile last year, which had largely been a drag on their net interest incomes.

Meanwhile, banks were also seen adding more heft into their capital buffers by way of equity, debt and hybrid instruments in both the rupee market as well as the dollar market to ward off potential pressure on their regulatory capital adequacy levels, which could stem their aggressive growth plans.

The interim results of banks for the June quarter, which are slowly coming out, already have demonstrated this phenomenon as they have broadly stayed the course for growth as seen from their little impacted balance sheet growths.

Strong private sector credit is an important economic gauge as it reflects dynamism of a country’s economic activities from new investments to production and consumption.

MIRROR BUSINESS

en-lk

2021-08-02T07:00:00.0000000Z

2021-08-02T07:00:00.0000000Z

https://dailylankadeepa.pressreader.com/article/281921661089418

Wijeya Newspapers