Loan defaults on the rise since June

The numbers of people who default loans have grown from June this year, according to experts.
The Credit Information Bureau, which gathers data from 95 finance organisations that are registered with the Central Bank stated that since June this year, the number of loan defaults has increased significantly.
“Earlier we received around 3000-3500 reports of loan defaults. However from the month of June this has risen to around 4100. This strongest indication is that from June, finance companies have requested for more reports of their loan payments. This means that loan defaults have increased,” said SLLIS General Manager Gamini Karunaratne.
He noted that this was probably due to the high interest rates that were prevalent before the government reduced rates of State Banks last week. Private Banks also announced that they would consider revising their interest rates to remain competitive.
Deputy Finance Minister Ranjith Siyambalapitiya noted that if the private banks do not follow the lead of state banks, the government would take steps to reduce their interest rates as well. Karunaratne opined that they would closely monitor the default rates as it could be a warning of a larger economic shift within the financial climate. The global recession, which was sparked by a massive number of defaulted housing loans in the US being an indicative of how defaulted loans can have a domino effect in an economy.