Banks Channelled 70% of Credit to Productive Sectors: HNB CEO 📈

• Overall Private Credit: Total outstanding private sector borrowing from Sri Lankan banks surged 25.2% YoY to an 8-year high of Rs. 10,212 Bn in 2025 (nearly doubling from Rs. 5,561.4 Bn in 2018). By end-May 2026, outstanding credit surpassed Rs. 11,000 Bn. • Productive vs. Consumer Lending: HNB CEO Damith Pallewatte estimates at least 70% of 2025's credit expansion was channelled to productive sectors (like manufacturing and export-oriented businesses), driven by higher working capital needs after a 5.6% rupee depreciation in 2025. Conversely, consumer borrowing, credit cards, and personal lending remained subdued. • Sector Highlights: Housing finance emerged as a gradual, positive growth sector. Vehicle financing rose due to pent-up demand after years of import bans, but was deemed "misunderstood." Vehicle imports accounted for only 12.86% of current account outflows up to Nov 2025 (approx. US$ 2.1 Bn projected for the year), with reserves remaining stable. • Key Risks & Resilience: Despite supporting an economic recovery of over 5% growth, the banking sector faces emerging headwinds. These include geopolitical shifts, heightened cybersecurity threats from digital migration, agriculture-impacting climate risks, and talent shortages driven by the migration of skilled professionals. Nonetheless, capital adequacy and liquidity levels remain comfortable. _(Based on provisional industry data and executive remarks)_