Thursday, 30 April 2015 00:11
Contd. from page 5
Banking density i.e. the number of bank branches per 100,000 persons, improved to 17.0 at the end of 2014 from 16.8 in the previous year. Meanwhile, the licensed finance companies (LFC) and specialised leasing companies (SLC) sector grew by 18.9% in terms of total assets, compared to the growth of 20.3% in the previous year.
Prudential policies and regulations
The low interest rate environment helped maintain non-performing loans at a manageable level, while mergers and acquisitions during the year helped build up the resilience of the LFC and SLC sector. In relation to banking institutions as well as LFCs and SLCs, several prudential policy measures and regulations were introduced by the Central Bank during the year, with a view to enhancing their safety and soundness further. Performance of superannuation funds, insurance companies, primary dealers in Government securities and unit trusts also improved during the year.
In the meantime, financial markets remained liquid during the year. The performance of the Colombo Stock Exchange (CSE) improved considerably. The All Share Price Index (ASPI) increased by 23.4% to 7,299 while market capitalisation, also increased to Rs. 3.1 trillion by the end of 2014. Activity in the corporate debt market remained high, although there was a slowdown compared to the takeoff observed in 2013.
The national payment infrastructure operated smoothly, with several measures taken to enhance the efficiency and soundness of payment and settlement systems. Access to finance improved with continued provision of concessionary credit facilities to the agriculture and livestock sector as well as micro, small and medium scale enterprises (MSMEs).
Going forward, the Sri Lankan economy is projected to reach upper middle income levels in terms of per capita GDP, and sustain the favourable high growth and low inflation nexus in the medium term, supported by appropriate economic policies. The new Government formed in January 2015, is expected to uphold policies of good governance and transparency, which would support a high growth path through improved investor sentiment and also lead to a more equitable distribution of benefits of economic growth. In addition to balancing the trade-off between growth and equity, the new Government faces the enormous task of articulating a coherent medium term policy framework, which addresses possible shortcomings of previously announced policies as well as the challenges already identified.
Addressing such challenges would be essential to realise the projected growth path as envisaged in the medium term, enabling the economy to achieve its full potential while maintaining macroeconomic stability in a more equitable environment.