May private credit up despite lockdowns

• Expands by Rs.55.6bn compared to Rs.55.7bn in April
• Could be result of loans approved earlier but disbursed in May
• Total bank credit extended to private sector in first 5 months at Rs.330bn
• CB lowers its private credit growth target to 12% from 14% due to virus-related disruptions on economy 

Bank credit to the private sector continued in May, although losing momentum from the recent high in March, indicating that loan disbursements had continued despite a semi-dormant economy due to COVID-19 related lockdowns during the month.

Sri Lanka’s private sector credit expanded by Rs.55.6 billion in May after banks disbursed Rs.57.7 billion in April. May’s fresh credit translates to a robust 10.5 percent growth from the same month last year, and up from 8.2 percent in April. 

During March, private sector credit expanded by Rs.112.2 billion, as economic activities were in full swing.

May’s strong private sector credit could be the result of loans approved earlier but disbursed during the month, as there was  typically a delay between the two events.

There could have been only a little appetite for fresh credit in May as things started slowing down substantially since April 23 due the lockdowns, which were lifted on June 21. The licensed commercial banking sector in total had Rs.6.5 trillion worth of outstanding private sector credit as at end of May, up from Rs.6,445.9 billion by April end. 

During the first five months, the total private sector credit extended amounted to Rs.330 billion. 

The Central Bank in May lowered its expectations for private sector credit growth to 12 percent or Rs.750 billion for 2021, from 14 percent or Rs.863 billion projected at the beginning of the year largely due to COVID-19 related disruptions.