Innovative products to attract potential customers
Reduction in interest rates spurs healthy competition - Snr Economic
The reduction in interest rates by state banks has created healthy
competition among the private sector local and foreign banks. The
private sector banks need to introduce innovative products to attract
potential customers, Senior Economic Advisor, Director Financial
Services Cluster, Dr. Ranjith Bandara told Daily News Business.
Reduced interest rates
* Low interest rates, an opportunity for
rural farming community
* Informal money lenders to have tough
* End consumers to benefit by low cost
A new market opportunity has been created in the leasing sector as
there would be more customers approaching state banks for their
requirements. The competition would influence private banks to develop
more products and to re-organize themselves to meet the challenge, he
The effect of low interest rates on the rural sector would have an
impact on agriculture. This would create opportunities for the rural
farming community. The Banks should offer simple and less complicated
banking products to the agricultural sector, he said.
The financial sector was underutilized until recently.
Potential investors kept their distance due to the financial costs -
mainly high interest rates and the need for massive collaterals.
However, with the recent development the financial industry could
improve its capacity by serving new investors, he said.
The low interest rates would help to develop a healthy and vibrant
financial sector investor relationship. Informal money lenders will have
a tough time. New players would enter the financial market to reap the
benefits of low interest rates.
With the dawn of peace new opportunities have been created for local
as well as foreign investors.
There are new opportunities to be explored in the sectors of
industrial, services and agriculture with the development of
Sri Lanka has become a promising land and institutional
infrastructure that has been developed such as BOI and supporting
organizations can help pursue these opportunities, he said. End
consumers will benefit by the low cost finance. Investors will benefit
from the reduced financial costs and increased profit margin. This would
improve the level of confidence between the consumer and the investor.
The impact of low interest rates is cyclical. The low cost of finance
will reduce cost of production and increase the margins of profit,
generate employment and new sources of income.
This would result in enhancing the aggregate demand where the demand
for goods and services would increase.
This in turn would expand industries and have an impact on each and
every segment of the country, he said.