Negative effects to Banking Sector due to credit card and pawning rate cuts

shihan 93

shihan 93

Senior Equity Analytic

Posts : 97
Equity Stars : 2604
Reputation : 0
Join date : 2018-01-28

As you all know credit card i=max interest is 18% (down from 28%) pawning is 10%
full details - https://www.newsfirst.lk/2020/08/20/maximum-interest-rate-on-credit-cards-reduced-cbsl/?fbclid=IwAR2HrA6YGMpaqahWkGfRFkChxxnV0dcXToAgagBVe0n6o4AzPsyimA9jmfU

This is a big blow to all banks (specially NTB). Please trade wisely.

Last edited by shihan 93 on Fri Aug 21, 2020 1:37 pm; edited 1 time in total (Reason for editing : headline spelling)

samaritan

samaritan

Moderator

Posts : 4134
Equity Stars : 9363
Reputation : 188
Join date : 2015-05-16

The exorbitant interest rates discouraged credit card users in the past. So, increase in usage can set off the short fall in interest revenue. Like lower interest rates stimulated credit growth and the banking sector has performed well.

shihan 93

shihan 93

Senior Equity Analytic

Posts : 97
Equity Stars : 2604
Reputation : 0
Join date : 2018-01-28

samaritan wrote:The exorbitant interest rates discouraged credit card users in the past. So, increase in usage can set off the short fall in interest revenue. Like lower interest rates stimulated credit growth and the banking sector has performed well.

@Samaritan , Your explanation is related to fixed rates and long term loans, but for credit card interest rates, pawning , OD, and penalties decrease means reduction of huge profit for banks (specially NTB ans Sampath). Also all the people who can have credit card alreavdy have. therefore, this is very good general public who use credit cards and debt instruments and very bad for banks who mainly used unsecured short term debt (credit cards, ODs and etc). I hope small investors won't get burnt at least this time

samaritan

samaritan

Moderator

Posts : 4134
Equity Stars : 9363
Reputation : 188
Join date : 2015-05-16

shihan 93 wrote:

samaritan wrote:The exorbitant interest rates discouraged credit card users in the past. So, increase in usage can set off the short fall in interest revenue. Like lower interest rates stimulated credit growth and the banking sector has performed well.

@Samaritan , Your explanation is related to fixed rates and long term loans, but for credit card interest rates, pawning , OD, and penalties decrease means reduction of huge profit for banks (specially NTB ans Sampath). Also all the people who can have credit card alreavdy have. therefore, this is very good general public who use credit cards and debt instruments and very bad for banks who mainly used unsecured short term debt (credit cards, ODs and etc). I hope small investors won't get burnt at least this time

All who can have c/cards may already have BUT they curtailed spending due to the exorbitant interest rates charged by banks. Now a lower interest rate for c/cards and a higher tax relief can stimulate more spending.
Furthermore, the bank's borrowing cost is also at an all time low as FD rates have come down by about 60%. So, reducing int rates on c/cards, OD etc will not make a significant impact on profit margins.

dayandacool

dayandacool

Moderator

Posts : 539
Equity Stars : 2466
Reputation : 11
Join date : 2019-08-26
Location : Colombo

samaritan wrote:

shihan 93 wrote:

samaritan wrote:The exorbitant interest rates discouraged credit card users in the past. So, increase in usage can set off the short fall in interest revenue. Like lower interest rates stimulated credit growth and the banking sector has performed well.

@Samaritan , Your explanation is related to fixed rates and long term loans, but for credit card interest rates, pawning , OD, and penalties decrease means reduction of huge profit for banks (specially NTB ans Sampath). Also all the people who can have credit card alreavdy have. therefore, this is very good general public who use credit cards and debt instruments and very bad for banks who mainly used unsecured short term debt (credit cards, ODs and etc). I hope small investors won't get burnt at least this time

All who can have c/cards may already have BUT they curtailed spending due to the exorbitant interest rates charged by banks. Now a lower interest rate for c/cards and a higher tax relief can stimulate more spending.
Furthermore, the bank's borrowing cost is also at an all time low as FD rates have come down by about 60%. So, reducing int rates on c/cards, OD etc will not make a significant impact on profit margins.

That's true. Businesses are more focus on volume than large margins these days. Banks are no exception (Financials for DFCC and SFIN are examples). Ability of public spending was really down due to many reasons during covid era and this could well be a blessing in disguise for the banking and finance sector.

Sponsored content

Name*:
Phone number:
Email address*:
Comments*:
* - required fields	Learn

Name*:
Phone number:
Email address*:
Comments*:
* - required fields	Learn

Latest topics

Negative effects to Banking Sector due to credit card and pawning rate cuts

1 Negative effects to Banking Sector due to credit card and pawning rate cuts Fri Aug 21, 2020 1:35 pm

shihan 93

2 Re: Negative effects to Banking Sector due to credit card and pawning rate cuts Fri Aug 21, 2020 1:48 pm

samaritan

3 Re: Negative effects to Banking Sector due to credit card and pawning rate cuts Fri Aug 21, 2020 2:57 pm

shihan 93

4 Re: Negative effects to Banking Sector due to credit card and pawning rate cuts Fri Aug 21, 2020 3:35 pm

samaritan

5 Re: Negative effects to Banking Sector due to credit card and pawning rate cuts Fri Aug 21, 2020 8:44 pm

dayandacool

6 Re: Negative effects to Banking Sector due to credit card and pawning rate cuts

Sponsored content

New topics