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Panicked by toungelash of @GotabayaR, @CBSL has unloaded Rs112 bn by cutting SRR to 2% on banks already with excess liquidity of Rs100 bn+a refinance facility of Rs150 bn misreading the issue as lack of liquidity;credit flows constrained by structural issues such as 2/
Such as fear of default which had to be tackled by a comprehensive credit guarantee scheme & smoothing out banks’ internal credit approval systems;instead of using CRIB reports for rejecting loans,a rating system should have been used to eliminate only the worst ones 3/
Now @CBSL has another problem of banks parking excess liquidity of about Rs375 bn under its Standing Deposit Facility at 5.5% involving interest out payment of Rs 20 bn making it bankrupt;will have to cut SDF rate to 3% & SLF rate to 4% pushing all interest rates down 4/
It will have repercussions on other sectors such as depositors getting less, T bill and bond rates down, expected foreign flows to that market dwindling & rupee under further pressure for depreciation;shouldn’t resort to policies under panic as stressed by @JosephEStiglitz
