CB issues warning over dip in bank lending
Governor Ajith Nivard Cabraal |
Central Bank last week issued a warning to commercial banks over the dip in lending to private sector despite ease in interest rates and liquidity and urged them to step up their support thereby arrest any adverse impact on the economy.
* Growth of credit to private sector down from 7.9% in end 2008 to 6.4% in January despite reduction in interest rates; release of liquidity
* Urges banks to boost lending immediately thereby arrest any adverse consequences on the economy
The Bank said it noted with “concern” that commercial banks have not yet responded sufficiently to the easing of the monetary policy stance of the regulator.
“Notwithstanding the relaxation, the rate of growth in credit to the private sector has declined sharply to 6.4 per cent in January 2009 from 7.9 per cent at end 2008,” the Bank said.
In this context the Central Bank has requested commercial banks to enhance lending activities immediately so that the credit flow to the private sector is ensured and economic activities in the country are supported, thereby “arresting any adverse consequences on the economy. “
In view of the sharp decline in inflation and inflation expectations, the Central Bank has been relaxing its monetary policy stance and has taken several measures to enhance liquidity in the market.
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