Central Bank sets maximum limit on pawning interest rates

COLOMBO (News1st): Sri Lanka's central bank has instructed licensed banks to limit the interest rates on pawning to one percent a month from April 27 to provide relief to low-income individuals who are pawning gold jewellery to meet their short-term financing needs due to the adverse economic situation resulting from the COVID-19 outbreak. "This maximum interest rate will be applicable for all new pawning advances and existing pawning facilities that become due for renewal commencing the date of the order," the central bank said. Accordingly, the interest charged on the money lent by licensed banks in exchange for gold articles would be limited to 12 percent a year or 1 percent a month if the pawning period is less than one year. The banking authority called on other institutions to offer low-interest rates to facilitate customers in obtaining urgent finances at affordable costs so that they could, later on, redeem their pawned gold jewellery. Current interest rates charged by licensed banks on pawning advances range from 12 to 17.5 percent a year, the central bank observed.