Holding

Apr 09, 2013 (LBO) - Sri Lanka's banks have experienced a moderate weakening in asset quality and capital ratios as the country recovers from a credit bubble, central bank data up to the third quarter of 2012 has shown. Gross non-performing loans rose to 4.





0 percent from 3.8 percent in 2011, but the ratio is much lower than the 8.

5 percent seen after a balance of payments crisis in 2008. Net non-performing loans have risen to 2.

4 percent from 2.1 percent.

There has been a faster weakening of capital ratios amid strong credit growth.

Tier I capital ratio fell to 13.3 percent from 14.4 percent and total capital adequacy fell to 13.



3 percent from 14.4 percent.

Net non-performing loans to capital funds rose to 14.1 percent by the end of the third quarter of 2012 from 11.

5 percent in 2011.

Provision coverage as a percentage of gross non-performing loans fell to 40.

2 percent from 46.0 percent.

In 2010, despite pressure being brought on banks to increase lending, Central Bank Governor Nivard Cabraal urged banks to publicly lend only to good borrowers.

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