Excess liquidity in the banking system rose by more than LKR 20 billion in a single session, reflecting a significant shift in short-term funding conditions.
Excess liquidity in Sri Lanka’s banking system expanded to LKR 64.26 billion on June 23, 2026, up from LKR 44.16 billion recorded in the previous session, representing an increase of more than LKR 20 billion within a single trading day.
The rise places system liquidity at one of its higher recent levels, based on data tracked over the past two weeks. The Central Bank of Sri Lanka’s holdings of government securities have remained elevated during the same period, which has contributed to the overall liquidity position in the interbank market.
Elevated excess liquidity generally reduces pressure on short-term interbank lending rates, as commercial banks hold surplus funds beyond their statutory requirements. When liquidity is ample, overnight borrowing costs tend to remain contained, which can support lower rates at the short end of the yield curve.
The development comes alongside a broader decline in Treasury Bill yields recorded at the most recent auction. The 91-day bill settled at 10.02% and the 184-day bill at 10.16%, both lower than prior auction results. The alignment between rising system liquidity and falling short-term yields is consistent with improved funding availability across the financial system.
Banking sector participants were among the primary drivers of secondary bond market activity during the session, with trading concentrated in mid-tenor government securities.
Total outstanding government securities in the system stood at LKR 18,438.71 million as of June 23, with Treasury Bonds accounting for LKR 16,070 million of that total.
Key Numbers:
| Metric | Value |
|---|---|
| Excess Liquidity (June 23) | LKR 64.26 Billion |
| Excess Liquidity (Previous Session) | LKR 44.16 Billion |
| Change | +LKR 20.10 Billion |
| 91-Day T-Bill Yield | 10.02% |
| 184-Day T-Bill Yield | 10.16% |
| Total GSEC Outstanding | LKR 18,438.71 Million |
Business Impact:
For commercial banks, higher system liquidity reduces reliance on overnight borrowing and supports net interest margins on short-term placements. For businesses seeking working capital financing, ample liquidity in the system is a positive signal that lending conditions may ease at the short end. Importers and exporters with short-term facilities linked to market rates should monitor whether this liquidity expansion translates into lower effective borrowing costs over the coming weeks.
Source Attribution:
Source: Central Bank of Sri Lanka statistics, First Capital Holdings fixed income market data and publicly available financial market information.