Slash in interest rates: Window of opportunity for growth
Consequent to the reduction in the interest rates, the Bank of Ceylon
is of the view that this creates a window of opportunities for a
considerable growth in the business volumes specially in the areas of
agriculture, SME, fisheries, animal husbandry and housing where there is
much potential for growth in the country and, as a spill-over effect,
improve the quality of loans.
The borrowers who are in non performing status mainly due to the
higher interest regime will now have a great opportunity to turn them
into performing loans, Bank of Ceylon Chairman Dr. Gamini Wickramasinghe
said in a press release.
The reduction in rates and withdrawal of penal rates will improve
repayment capacity of borrowers and encourage them to get rid of long
overdue debts. There will be two way effect to the bank's performance
through this low interest regime- reversal of provisions and recovery of
interest on already non-performing loans while the recovery of debts
will improve cash flows and credit quality ratios.
The enhanced lending volumes could make the bank sustain its
profitability notwithstanding to the lower interest margins.
The bank has taken positive steps to grasp this opportunity to
leverage its current sound liquidity strength and the distribution
capability and move with optimism to 2010.
The bank also will explore every opportunity to capitalize this low
interest regime to support boosting the post war economy. The volumes
could make the bank more efficient, Dr. Wickramasinghe said.