24.9% of Sri Lanka Financial Credit Bound to Vehicles & Gold: CBSL 📈

Nearly one in four rupees lent by domestic banks and finance companies is now secured against motor vehicles or gold, the Central Bank of Sri Lanka (CBSL) warned in its Financial Stability Review 2026, citing collateral valuation risks. • Credit Share Growth: Combined share of motor vehicle credit and gold-backed lending rose to 24.9% of total credit by end-June 2026 (up from 19.6% at end-2024). • Sector Breakdown: • Motor Vehicles: Rose to 12.9% of total loans (up from 9.8%) as import easing in early 2025 unleashed pent-up demand. • Gold-Backed Lending: Climbed to 12.0% (up from 9.8%). Bank pawning facilities alone surged 49.2% YoY. • Macro & Credit Trends: Overall credit growth accelerated from 14.0% in June 2025 to a peak of 27.9% in March 2026, before easing to 26.4% in June 2026. • Key Risk Factor: Global gold prices dropped ~18% from ~US$ 1,393/sovereign (Jan 2026) to ~US$ 1,141/sovereign (Aug 2026), threatening asset quality and collateral values. • CBSL Policy Controls: • Lowered vehicle LTV limits: Capped at 60% for new commercial and used vehicles, and 40% for other new vehicles. • Max 70% LTV on gold-backed lending imposed in May 2026, followed by higher capital risk weights in September. • Finance company credit growth decelerated to 45.0% in Q2 2026 (down from 52.4% in Q1).