📈 CBSL Eases Related-Party Guarantee Rules, Tightens Reporting

The Central Bank of Sri Lanka (CBSL) has issued Banking Act Determination No. 01 of 2026 (effective Sept 1, 2026), revising insider lending rules to prevent favorable treatment and mitigate conflicts of interest. • Key Policy Relaxations • Corporate Guarantees: Cover limit raised to 100% for guarantors rated 'BBB-' and above (previously capped at 60%–80%). • Machinery Collateral: Pledging machinery allowed as collateral for the first time, capped at 50% of external valuation. • Public Sector Lending: Treasury letters of undertaking now accepted for loans to Ministries, Departments, and SOEs (provided budget provision is disclosed). • Unchanged Collateral Ratios • Government/CBSL Securities & Cash Deposits: 90% • Freehold Property (Primary Mortgage): 80% • Life Insurance Policies: 75% • Gold: 70% • CSE Listed Shares & Corporate Debentures ('AAA' to 'BBB-'): 50% • Reporting & Compliance • FinNet Integration: Reporting shifts from unspecified formats to two required electronic returns (BSD-QF-06-RPC and BSD-QF-06-RPI), starting quarter ending Sept 30, 2026. • Stage 3 Provisions: Borrowers becoming related parties solely due to shared directors must provide approved collateral within 90 days if credit quality drops to Stage 3.