📈 CBSL Financial Stability Review 2026: Financial System Resilient Amid Rising Risks

Sri Lanka's financial system remained stable in H1 2026, backed by a 4.2% GDP growth in Q2 2026 and improved fiscal conditions, though external uncertainties and rapid private sector credit growth pose emerging risks. • Macro & Financial Markets - GDP growth reached 4.2% in Q2 2026, while inflation rose to 7.3% (July 2026). - ASPI rose 5.2% (Jan–Aug 2026) to 21,338.69 with net foreign outflows of US$ 171.8 Mn. - Foreign investors bought a net US$ 207.7 Mn in T-Bills/Bonds; 364-day T-Bill yield rose to 9.80%. - CBSL net forex purchases stood at US$ 1.52 Bn; USD/LKR rate was Rs. 328.01 as of August 2026 (-5.5%). • Banking Sector - Credit grew 23.6% YoY in Q2 2026, led by consumption, trade, financial services, and construction. - Gross Stage 3 loans ratio improved to 9.1% (vs 11.9% in Q2 2025), but Stage 2 loans rose 17.8% YoY. - PAT grew 12.9% YoY in H1 2026; Capital Adequacy Ratio (CAR) remained healthy at 18.2%. • Non-Bank Financial & Insurance Sectors - Finance Companies (FCs) credit jumped 45.0% YoY in Q2 2026, driven by vehicle and gold-backed lending, though PAT fell 21.0% YoY. - Insurance sector Gross Written Premium (GWP) grew 20.3% YoY in H1 2026; general claims rose 21.4% YoY due to Cyclone Ditwah impact. • Household & Corporate Sectors - Household credit grew 25.4% YoY in Q2 2026; banks held a 62.5% share while NBFIs accounted for 37.5%. - Listed Non-Financial Corporate revenue grew 22.0% YoY in H1 2026, though aggregate profitability moderated due to higher operating costs.