Sri Lanka forces lending rate cuts on all banks

Sri Lanka's main financial regulator Tuesday ordered local and foreign banks to slash lending rates in an unprecedented move as the economy struggled to recover from the Easter attacks. The Central Bank of Sri Lanka said it ordered all commercial banks to reduce lending rates by a minimum of 200 basis points within three weeks. It comes weeks after the government complained that lending rates had not kept pace with sharply lower deposit rates that fell by over 250 basis points since the April attacks, when hundreds were killed in suicide bombings.
Banking experts said it was the first time since the inception of the central bank in 1950 that it had resorted to imposing a mandatory ceiling on lending rates. Average lending rates are currently around 13 to 15 percent, while the country's inflation had slowed to 2.2 percent in July.