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Sri Lanka central bank to develop a cost-based rate to price loans EmptyToday at 10:26 am by The Invisible

» In the Meantime, Within Our Shores !
Sri Lanka central bank to develop a cost-based rate to price loans EmptyYesterday at 9:42 pm by Rajapaksap

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyMon Jul 06, 2020 9:06 pm by yellow knife

»  Rajgama Heroes !
Sri Lanka central bank to develop a cost-based rate to price loans EmptySun Jul 05, 2020 10:05 pm by serene

» Thread for News on CSE and SL Economy
Sri Lanka central bank to develop a cost-based rate to price loans EmptyFri Jul 03, 2020 7:17 am by The Invisible

» Access Engineering AEL Technical Analysis
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» Obituary Notice.
Sri Lanka central bank to develop a cost-based rate to price loans EmptyWed Jul 01, 2020 12:51 pm by කිත්සිරි ද සිල්වා

»  6000 Post Club , Celebration of a Great Milestone, Slstock
Sri Lanka central bank to develop a cost-based rate to price loans EmptyTue Jun 30, 2020 9:35 am by slstock

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyTue Jun 30, 2020 8:00 am by LSE

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyMon Jun 29, 2020 9:35 am by nuwanmja

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Sri Lanka central bank to develop a cost-based rate to price loans EmptySun Jun 28, 2020 10:30 am by The Invisible

» 104 Technical trading experiments by HUNTER
Sri Lanka central bank to develop a cost-based rate to price loans EmptySat Jun 27, 2020 10:27 pm by HUNTER

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Sri Lanka central bank to develop a cost-based rate to price loans EmptySat Jun 27, 2020 4:02 am by desh87

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyFri Jun 26, 2020 11:35 pm by nihal123

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» SAMP.N0000 (Sampath Bank PLC)
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» HAYC - Haycarb
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Sri Lanka central bank to develop a cost-based rate to price loans EmptyThu Jun 18, 2020 11:13 pm by nihal123

» HAYL.N0000 Hayleys PLC
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» GLAS.N0000 (Piramal Glass Ceylon PLC)
Sri Lanka central bank to develop a cost-based rate to price loans EmptyWed Jun 17, 2020 12:29 pm by nuwanmja

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» සල්ලි අච්චු ගැසුවාද?
Sri Lanka central bank to develop a cost-based rate to price loans EmptyWed Jun 10, 2020 11:35 pm by nihal123

» වටිනා පාඩමක්!
Sri Lanka central bank to develop a cost-based rate to price loans EmptyWed Jun 10, 2020 9:58 pm by Backstage

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» Hayleys MGT
Sri Lanka central bank to develop a cost-based rate to price loans EmptyTue Jun 09, 2020 11:16 am by The Invisible

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyTue Jun 09, 2020 11:08 am by The Invisible

» Sri Lanka import controls, cargo bottleneck hit apparel exporters
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Sri Lanka central bank to develop a cost-based rate to price loans EmptyMon Jun 08, 2020 8:47 am by slstock

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyThu Jun 04, 2020 4:32 pm by Backstage

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyThu Jun 04, 2020 2:21 pm by The Invisible

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Sri Lanka central bank to develop a cost-based rate to price loans EmptyWed Jun 03, 2020 9:49 pm by nihal123

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Sri Lanka central bank to develop a cost-based rate to price loans

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Sri Lanka central bank to develop a cost-based rate to price loans Empty Sri Lanka central bank to develop a cost-based rate to price loans

Post by The Invisible on Wed Jan 08, 2020 10:21 pm



ECONOMYNEXT – Sri Lanka’s central bank said it was developing a cost based benchmark interest rate to price loans, hoping unusually that it will improve competition.

“Establishing a sound benchmark interest rate for the banking sector, which reflects actual cost of funds, has become vital given the deficiencies of the existing benchmark interest rates,” the central bank said in a roadmap for monetary policy in 2020.

“The Central Bank intends to set up a task force with the participation of relevant stakeholders to introduce an appropriate cost reflective benchmark interest rate for pricing loan products.

“We believe that this measure will improve healthy competition among banks, while supporting efficient transmission of monetary policy measures.”

It is not clear how cost-based pricing will improve competition as the key drawback of cost-based pricing is that it ignores that there is competition as rookie business studies students learn.

With competition eliminated, the regulator then has to set targets to bring costs of various components down as is done in telecom, power cost based pricing.

Costs can differ widely from bank to bank, based on how inefficient, or overstaffed each bank is. Any cost based pricing would eliminate the need to cut costs due to competition, a key problem with formula based pricing.

There have already been complaints that high costs of state banks, which command large shares of deposit and loan markets is a reason for high nominal rates.

Sri Lanka has high and volatile interest rates, a phenomenon common in countries with monetary instability and currency depreciation.

Sri Lanka’s central bank last year killed competition in deposit markets by forcing banks to artificially bring down rates on the threat of punitive action after destroying the real value of customer deposits through currency depreciation.



See Also


Sri Lanka rupee ends weaker, gilt yields fell



Slow Sri Lankan regulations delay Dialog Finance's fintech innovations



Sri Lanka stocks plunge 2-pct, dives below 6,000



Sri Lanka President orders quick construction permits



Avirate fashion of Sri Lanka to continue global expansions in tie-up with Expolanka

Analysts have called for monetary reform either in the form of consistent peg, or a genuine floating rate, which will end balance of payments trouble. (Colombo/Jan08/2020)
The Invisible
The Invisible

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