Jan 02, Colombo: Sri Lanka's monetary authority, Central Bank renamed the reverse repurchase rate Standing Lending Facility Rate and reduced the rate by 50 basis points to 8.00 percent on Thursday with immediate effect.
The Bank left the repurchase rate unchanged at 6.50 percent compressing the Standing Rate Corridor to 150 basis points from the current 200 basis points.
The Central Bank expects the move will facilitate the reduction of the interest spread of banks over time, without affecting the deposit rates offered by banks to their customers.
Issuing its Monetary Policy Review Thursday the Central Bank said the continued easing of monetary policy through 2013 amidst low and stable inflation has brought about the desired macroeconomic outcomes.
Based on leading indicators the Bank predicted the real GDP growth for 2013 to be around 7.2 percent growth and expects the economic growth to accelerate further during the new year, while inflation is projected to remain in mid-single digits.
Considering all the economic developments, the Monetary Board has decided to establish a Standing Rate Corridor (SRC) in place of the current Policy Rate Corridor with immediate effect.
Accordingly, the Board has decided to rename the current Standing Repurchase Facility as the Standing Deposit Facility (SDF) and the current Standing Reverse Repurchase Facility as the Standing Lending Facility (SLF).
Considering the improvement in the external sector,the Monetary Board also decided to remove the minimum cash margin requirement of 100 per cent against Letters of Credit opened with commercial banks for the import of certain categories of motor vehicles, imposed on 30th August 2013.