The decline in interest rates has triggered an increase in bank borrowing in Sri Lanka, a trend that is expected to continue in the coming months. With monetary policy easing further in the most recent review of 2024, short-term money market interest rates have dropped significantly, while the weighted average reserve requirement ratio has stabilized at the overnight policy rate.
The Central Bank of Sri Lanka (CBSL) confirmed this shift in its Monetary Policy Statement No. 01 of 2025, indicating that the reduction in borrowing costs has fueled a surge in private sector credit growth. This is seen as a positive sign for economic recovery, as businesses and individuals are increasingly taking advantage of lower lending rates.
The easing of monetary policy has also led to a continued decline in market lending and deposit interest rates, making credit more accessible to businesses and consumers alike. This has encouraged more borrowing from licensed commercial banks, reflecting renewed confidence in economic activity.
Furthermore, the yields on government securities have continued to decline, indicating an improvement in the country’s fiscal performance and a reduction in sovereign risk premiums. This suggests a more stable financial environment, making it an opportune time for individuals and businesses to secure financing for expansion, investment, or personal needs.
As borrowing becomes more attractive, financial analysts recommend that potential borrowers assess their repayment capacities carefully before taking on new loans, ensuring they capitalize on the favorable interest rate climate without overextending their financial commitments.
