Credit to the private sector has increased in February by 1.38 percent to Rs. 1,212.3 billion from Rs. 1,195.8 billion the previous month while benchmark Treasury bill rates inched downwards as the Central Bank continues to pursue a loose monetary policy.
According to data released by the Central Bank, credit to the private sector from the domestic banking sector increased to Rs. 1,064 billion in February from Rs. 1,048 billion in January with the balance coming from external sources.
Compared with February 2009, credit to the private sector had declined by 2.8 percent this year. While overall net credit to the government declined 0.4 percent to Rs. 669.1 billion from Rs. 671.7 billion a year ago, credit from the domestic banking sector had grown 46.1 percent from the previous year.
Credit to the government had grown at a slightly faster rate than credit to the private sector in February, up 1.85 percent from Rs. 656.9 billion in January.
Last January, credit to the private sector dropped by 4.6 percent to Rs. 1,195.8 billion compared to Rs. 1,253 billion in January 2009. Private sector credit had recorded a marginal 0.06 percent growth from December 2009 to January 2010.
Credit to the government increased by 3.1 percent to Rs. 656.9 billion in January 2010 from Rs. 639.4 billion in January 2009. Credit to public corporations increased by 42 percent to Rs. 76.3 billion from 53.7 billion.
Benchmark rates down
Benchmark Treasury bill interest rates declined marginally at the primary market auction earlier this week where the Central Bank accepted Rs. 10.7 million from bids amounting to Rs. 30.7 million according to data from the Public Debt Department of the Central Bank.
The three month Treasury bill rate fell marginally to 8.40 percent from 8.46 percent the previous week. The six month bill rate fell to 9.10 percent from 9.21 percent while the twelve month Treasury bill rate fell to 9.30 percent from 9.46 percent.
A year ago, the Treasury bill yields stood at 14.09 percent, 15.88 percent and 16.40 percent for the three month, six month and twelve month bills respectively.
Market interest rates
Market interest rates have been moving in either direction with commercial bank lending rates picking up marginally while deposit rates have declined.
The average weighted prime lending rate of commercial banks increased marginally to 10.59 percent last week from 10.42 percent the previous week. A year ago the rate was 18.83 percent. However, these indicative rates applies to lending rates offered to the customers of each bank where as ordinary borrowers would have no choice but accept loans at higher rates.
While prime lending rates increased over the week, indicative deposit rates declined marginally.
The average weighted deposit rates of commercial banks declined to 7.22 percent last week from 7.40 percent the previous week and the average weighted fixed deposit rate declined to 9.71 percent from 9.99 percent. A year ago the indicative deposit and fixed deposit rate stood at 11.53 percent and 16.32 percent respectively.
Earlier this week, the Central Bank announced that it would continue to hold policy interest rates at current low levels in a bid to give commercial banks more time to increase their lending, because, as analysts point out, although interest rates have come down dramatically private sector lending is recovering at slower pace.