CBSL to reduce net interest margins

Central Bank of Sri Lanka (CBSL) is working with banks to bring down the net interest margins which is above 4% due to high taxes and high level non-performing loans, CBSL Governor Dr. Nandalal Weerasinghe said.

Speaking to the media yesterday (23), he said that net interest margins in the banking sector have been relatively increasing because of the compression the sector had during the crisis period.

As a result, he said that banks profitability was higher in 2024 because of the reversal of some of the provisions for debt restructuring.

However, he said that the levels of profitability is gradually coming down but still relatively higher when compared to the last several years.

According to CBSL, the banking sector reported a profit after tax of Rs.187.5 billion in the first half of this year compared to Rs. 111.8 billion in the same period of 2024, recording a significant growth of 67.8%.

“We would hope that going forward with the stabilisation, with the stage 3 loans coming down, it will come down further. We would like to see net interest margin less than the current level, the historical average has been 3.5% but now it is just above 4%, which a 0.5% higher,” he said.

Further, he said that the Financial Consumer Relations Department (FCRD) is working on bringing regulations for banks to much more disclosures, transparency and competition to bring down the net interest margin.

source: The morning