In accordance with the Government initiative to develop the nation, targeting rapid growth in the fields of Agriculture, Small and Medium Enterprises and Industrial businesses, People’s Bank has reduced their interest rates on Loan and Gold Pawning.

Under this initiative, annual interest on Loans will be reduced by a rate of up to 3%, while interest rates on Gold Pawning Loans have been reduced to a rate of 17.5%, the lowest in the market at present. This is the fourth time that People’s Bank has reduced their interest on loans within the current year itself - a total reduction amounting to 6% during the year.

“The low interest rate on loans and reduction of the amount paid for loan instalments gives a great mental relief to a person as well as create an attitudinal shift in society. Lowering the interest rates will rejuvenate the economy by giving it a much needed boost as well. The development of the economy is important not only for society to progress but also for individual development as well. Therefore the low interest rates will have both direct and indirect results on society,” stated W. Karunajeewa, Chairman of People’s Bank.

These reductions in the rates of interest will apply to loans utilised for the sectors of Agriculture, Animal Husbandry, Fisheries, Micro Finance Loans for Small and Medium Enterprises, Housing and Construction, Hotel and Tourism and Export.

This decision has been made as a means of accelerating the achievement of the Government’s targets for development, as well as increasing job opportunities and productivity in the above mentioned fields; principally with the aim of offering new investment opportunities to attract and fulfil the aspirations of young entrepreneurs. Through this reduction of interest on the loan facilities on offer, enterprises gain more opportunities to make higher earnings by the reinvestment of capital in the business.

The reduction of interest rates on loans given to the fisheries, agriculture and animal husbandry industries would assist in developing these sectors while boosting the rural economy. With the expansion of paddy cultivation and other crops, the purchasing power of the farmers would increase and due to this increase in consumption, their productivity levels will also increase. Inflation management would occur through this system as supply generated matches the demand, thereby increasing the rate of progress of the economy. The reduction of interest rates will open new opportunities to those beginning their own enterprises, as well as improving their existing businesses. In addition, the ability to pay off loans in instalments would give much needed confidence to entrepreneurs to put more effort into their business through investments, in order to make them profitable ventures.

Reducing the interest rates on housing loans will assist many to build new homes, renovate and modernize existing structures as well as obtain additional land. The increase in sales and distribution of construction material would contribute to the higher income levels of those involved in the housing and construction industry. Additionally the job market would also improve for those such as electricians and masons, as there is higher need for such specialized workers.

It can be expected that the once failing hotel and tourism industry would be rejuvenated by the reduction of interest rates in the sector. This will have a positive impact on areas in the North and East, in places such as Arugam Bay, Pasikuda and Nilaweli. The opportunity to build numerous hotels and tourist bungalows in these areas will result in both direct and indirect employment opportunities for those in the region.

Measures are currently underway to further reduce the interest rate paid on loans and to reduce the amount paid for loan instalments. By doing so, it can be foreseen that the amount of “cash in hand” as well as the purchasing power of the public will significantly increase, while helping to develop the retail and service sectors.