Credit card rates to
follow interest rate cut

With many indulging in a spending spree during this festive season, the island’s banking watchdog- the Central Bank of Sri Lanka (CBSL) urged all commercial banks to reduce interest rates charged on credit cards, in view of its own relaxation of the monetary policy.
However, when The Bottom Line contacted officials of the banks, most of the banks stated that they were already in line with the Central Bank’s directive.
“Although we are still new to the credit card market and we do not have a fully fledged client base, our rates are quite competitive and in the range of 24-26 percent per annum, which we believe is in line with the market expectation,” Chief Executive Officer of DFCC Vardhana Bank, L. G. Perera, told The Bottom Line.
He says the bank however intends to cut rates further, once their product is launched on a large scale in January 2010.
Meanwhile, the Chief Finance Officer of Bank of Ceylon, Asoka Rupasinghe said that BoC has already taken steps to reduce rates further although they were presently charging interest rates between 24-36 percent.
The Central Bank in a recent statement stated that it had observed with concern that interest rates charged by licensed banks on credit cards have remained unchanged and were in the range of 33 per cent to 48 per cent since December 2008.
“It is however noted that currently there is adequate leeway for the banks to reduce such interest rates on credit cards since the interest rates structure has moved down due to the relaxation of the monetary policy. Accordingly, banks have been requested to reduce the interest rates levied on credit cards to at least a level between 24 per cent and 36 per cent,” the statement added.
Sri Lanka’s credit card market is relatively small as there are over 900,000 credit card users in a working population of seven to eight million. There are over 650,000 cardholders with the potential to grow. Steps need to be taken to encourage merchants and traders to accept credit cards to enable the wider use of credit cards as it is an easy mode of payment with less risk (AR)