Sri Lanka’s central bank will revise up ceiling interest rates on credit card loans and temporary overdrafts now after policy rates were raised on March 04, to reduce money printing and a bring forex crisis under control.
The central bank will “revise upwards the caps imposed on interest rates applicable to credit cards to 20 per cent per annum, on pre-arranged temporary overdrafts to 18 per cent per annum, and on pawning facilities to 12 per cent per annum,” the agency said.
“Directions to effect these regulated interest rates will be issued shortly.”
Sri Lanka has introduced a series of price controls on credit in recent years (financial repression) helping mis-allocate credit, fire bubbles, which has now led to a massive forex crisis.
The current crises was largely created by price ceilings on bond auctions which led to hundreds of billions of rupees being injected into the banking system.
The central bank also decreed housing loans at 7.0 percent. Inflation hit 15.1 percent in February 2022.
Source – Economynext