Contending For The Same Pie

Finance companies are facing tremendous competition from the banking sector this time because the deposit rates offered by both of these institutions are virtually the same, a finance company manager told this reporter on Tuesday.
Previously the difference was about 500 basis points, but now it’s virtually zero, he said. The source said that the whole problem is the illiquid status confronting money markets currently. However with an 18% credit growth ceiling imposed on banks from this year by Central Bank of Sri Lanka (CBSL), bank credit is expected to taper off in the coming weeks, giving finance companies that much needed thrust once more, he said.
Meanwhile it’s reported that Finance Ministry Secretary Dr. P.B. Jayasundera has said that the market’s illiquid status would disappear once the US$ one billion Bond proceeds enter the system last week (see also connected story found on page 35).
When CBSL buys such proceeds from the Government/Treasury, it pays for such in rupees, thereby uplifting the market’s rupee liquidity status.