COLOMBO, Sept 15 — Sri Lanka’s central bank imposed a 70 per cent limit on loans and advances for vehicles today, a move seen aimed at easing demand for credit and stemming dollar outflows.
The central bank said in a statement it had observed with concern the recent growth of exposure of banks and financial institutions to certain categories of lending, including for motor vehicles.
The bank cut its benchmark interest rate to a record low in April and imports have surged to 19.4 per cent in June year-on-year from 4.6 percent in September last year.
The new directive cuts the maximum loan value from 100 per ent to 70 per cent.
The Sri Lankan rupee weakened 0.3 per cent on today, hitting a record low for a third session in a row due to importers’ demand for dollars, dealers said.
The cost of vehicle imports has almost doubled in the first half of this year to $596.5 million compared to the same period last year, central bank data showed.
“The primary factor fuelling the demand for vehicles is credit,” said Murtaza Jafferjee, CEO of Colombo-based JB securities. — Reuters
