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Saturday, 04 April 2020 - 8:34
Central Bank reduces policy rates and informs banks to pass on the full benefits to the people without any delay

The Monetary Board of the Central Bank of Sri Lanka, on 03 April 2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 25 basis points to 6.00 per cent and 7.00 per cent, respectively, effective from the close of business on 03 April 2020.

This decision according to the Central Bank will complement the measures taken thus far to ease market conditions, and enable the domestic financial market to provide further relief to businesses and individuals affected by the outbreak of the COVID-19 pandemic and restrictions placed to contain its spread within the country.

Prior to today’s decision, the Central Bank, during the year thus far, has taken a number of measures to support the revival of domestic economic activity, in the context of well anchored inflation expectations and the absence of demand driven pressures on inflation. These include the reduction of policy interest rates of the Central Bank, facilitating the implementation of the credit support package for borrowers in both performing and non performing categories and the implementation of a credit guarantee scheme to revive non performing advances, while maintaining the dialogue with the financial market to ensure market lending rates continue to decline in line with the Monetary Law Act Order No. 02 of 2019.

The Central Bank also assured the financial market of the provision of liquidity as necessary to counter any impact arising from the evolving situation. Today’s decision will complement the above measures that are already in place.

The Central Bank reemphasises the need for all financial institutions led by licensed commercial banks to ensure the full benefit of the cumulative reduction of 100 basis points in policy interest rates thus far during the year as well as the reduced cost of funds through the reduction in SRR is reflected in market lending rates without further delay.

In addition, the Central Bank has requested financial institutions to refrain from engaging in speculative activity which could lead to panic in the financial market.

The Central Bank stated that they have put in place well tested business continuity arrangements, which will be triggered as and when required to prevent any disruption to cash and electronic transactions and ensure the timely settlement of liabilities of the government and the Central Bank.

The Central Bank further stated that they are working closely with the government to ensure coordinated fiscal and monetary policy responses to mitigate the economic impact of the COVID-19 pandemic. In particular, the Central Bank will work with the government to raise the required funding for the government smoothly to tackle the current exceptional situation.

The Central Bank will closely monitor global and domestic market developments and take further policy, regulatory and operational actions as necessary, while monitoring activities of each financial institution to ensure smooth functioning of the financial market and the transmission of the Central Bank action to the economy in order to ensure that those who are in need of urgent support receive the required timely assistance
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