📈 CBSL Credit Survey: Lending Appetite Rises Amid SME Challenges

The Central Bank’s 4Q 2025 survey indicates a broader easing of credit conditions and a rise in lending appetite, though MSMEs face persistent hurdles. • Sector Highlights: Banking Sector: Willingness to lend increased for retail, corporate, and SME sectors due to strong liquidity and political stability. Lending to State-Owned Enterprises (SOEs) declined. Asset Quality: Non-performing loans (NPLs) fell for the 6th consecutive quarter, driven by better cash flows and recovery efforts. Loan Demand: Surged across most segments, supported by stable rates and increased vehicle imports. • The MSME Gap: Rejections: While retail and corporate rejections fell, SME loan rejections increased slightly in 4Q 2025, cited to weather impacts and repayment constraints. Concerns: Small businesses continue to report high borrowing costs and tight credit assessments despite improving macro indicators. • Overall Growth: Private Sector Credit: Rose 25.2% YoY to a record Rs. 10.2 Trillion in 2025. 2026 Outlook: CBSL expects 1Q 2026 lending to expand further, with national GDP growth projected at 4-5%.