Sri Lanka's central bank on Thursday capped maximum lending rates after accusing commercial banks of failing to pass on benefits of a relaxed monetary policy to borrowers.

Colombo defaulted on its $46 billion foreign debt in April 2022 and most of its 22 million people endured months of food, fuel and medicine shortages, sparking civil unrest that eventually toppled then-president Gotabaya Rajapaksa.

His successor Ranil Wickremesinghe has doubled taxes, removed generous subsidies on energy and sharply raised prices to shore up state revenue.

The Central Bank of Sri Lanka reduced benchmark policy rates 450 basis points to 12 percent over June and July, but commercial banks had not correspondingly lowered their lending rates. It decided against another cut Thursday.

"Accordingly, the monetary board (of the central bank) decided to impose caps on interest rates," the bank said in a statement.

It said commercial banks will be restricted to charging a maximum of 28 percent on credit card balances, compared to current rates of 36 percent.

Over drafts will be limited at a maximum of 23 percent interest, compared to over 30 percent charged by some financial institutions.

Inflation peaked at 69.8 percent last September, but fell to 6.3 percent in July, its lowest rate in nearly two years.

The government secured a $2.9 billion bailout from the International Monetary Fund in March.

The IMF said in June that Sri Lanka's economy showed "tentative signs of improvement" but warned Colombo still needed to pursue painful reforms.