The banks and PDs borrow and lend to each other in the money market and any excess liquidity will deposit with CBSL at 14.50% or any shortfall will finance from CBSL at 15.50% on an overnight basis. CBSL has started lending term money to the market instead of overnight money at 28% to 29%.
As the interest rate has increased substantially, the market participants required more collaterals to borrow from CBSL. Borrowing & settling overnight basis creates operational hassle and increases settlement risk. CBSL has eased the operational and settlement risk by lending on a term basis ( 30 days to 60 days).