NSB's deposits grew by only 4.8 percent in 2006, with real interest rates turning sharply negative, as inflation shot up to 19.3 percent.
In 2006 savings rates were kept at 5 percent while 12 month fixed deposit rates were raised from 10.00 to 11.00 percent.
"We decided not to engage in a rate competition with the rest of banks," Chairman, Upali Gunaratne said.
NSB's head of finance, Hennayake Bandara, said the decision to keep rates low was a 'short term' strategy and was not influenced by outside pressure.
In 2006, the increase in new deposits plummeted to 9.8 billion rupees, compared to 22.2 billion a year ago, as the gap between the 12-month fixed deposit rates and 12-month point to point inflation widened to 9.3 percent from a neutral position in 2005.
Sri Lanka's inflation fell in 2005 with tsunami aid receipts and a debt moratorium reducing the need to print money to bridge