Drop in interest rates not beneficial as it seems – analyst

Drop in interest rates not beneficial as it seems – analyst

Drop in interest rates not beneficial as it seems – analyst

Written by Hassaan Shazuli

10 Jul, 2020 | 10:13 pm

COLOMBO (News1st): The steep drop in market interest rates offered by banks may not be beneficial as it seems, analysts said on Friday, as the Average Weighted Prime Lending Rate (AWPR) slid to 8.48 percent in June with compared to 11.52 percent year ago.

Analysts said the drop in interest rates, however, is a great opportunity to obtain long-term loans at low-interest rates and to retire and replace high-interest rate loans but in reality, with the current economic situation, it may not that easy for the general public to restructure the expensive loans.

“…youth who actually lost jobs or have got salary cuts may have a difficulty in obtaining loans,” Dimantha Mathew, an economic analyst told News1st.

The central bank had lowered deposit and lending rates for banks, to encourage banks to support businesses affected by the coronavirus pandemic.

However, Mathew said, considering the impact of the pandemic on businesses, banks would be more willing to lend to this creditworthy customers like large businesses.

“..it is really questionable whether the middle category businessmen or the Small and Medium Scale Enterprise category will be given loans,” he added.

Individuals who depend on interest earnings are likely to take a huge blow due to the drop in interest rates.

“They will be looking out for alternative investment opportunities. So in the search for that slightly higher risk assets, you will have to take in order to go for that,” he said.

The central bank has said that individuals who have already obtained loans should request banks to apply the revised interest rates on their debt.

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