Banking sector asset risks will increase after excessive credit expansion in the last two years and a rise in borrowing costs, Moody’s said in a new report on Sri Lankan banks.
“Nonperforming loan (NPL) ratios have risen, and corporates are facing higher borrowing costs due to a rise in benchmark interest rates.”
Moody’s said corporates’ debt serviceability will be weakened by higher interest rates.
“Higher interest rates will hurt corporates’ repayment ability.”
Around 40% of corporates will have debt interest coverage ratios of less than 2 under a stressed scenario, the rating agency said, noting that higher interest rates have begun to pressure borrowers.
(COLOMBO, 07 September, 2018)