CB’s policy rate cut affects LB’s deposit mobilisation
View(s):The coming quarter is posing immeasurable challenges to LB Finance PLC, especially after the policy rate cut by the banking regulator recently.
The 50 basis points (bps) cut in policy rates during May by the Central Bank (CB) and previously the imposition of deposit ceiling rates in April has so far seen Average Weighted Prime Lending Rate (AWPLR) dropping by nearly 170 bps has impacted finance companies such as LB Finance’s deposit mobilisation, officials said. “Right now we are facing many challenges. Especially in mobilising deposits. This is mainly because there’s only half a per cent to 1 per cent difference in the interest rates compared to the banks. So, this interest rate cut has affected all finance companies,” an official told the Business Times.
The aftermath of the Easter Day attacks which saw the country’s economic sentiments staggering to record lows is now seen evaporating with business outlook beginning to improve during the past four months as numerous steps are taken by the government. But the economy has been really bad during the past quarter, the official noted. Tourism sector ancillary services such as tourist car and bus operators are not repaying their installments, he said. “We are now giving moratoriums for them and letting them pay slowly.”
Revitalising the tourism sector involving the provision of free tourist visas, promotional campaigns and debt moratoriums alongside stimulating budget proposals is expected to result in an accelerated recovery, analysts say. The official agreed noting that, “From November onwards there is a charter flight from Poland and there is a Bohra community convention with 22,000 people attending this week. So we think that the tourism will recover.”
Analysts say that overall credit risk levels will remain high for finance firms for the rest of the year and is expected to recover post 1Q2020 with a complete recovery in tourism.
(DEC)