📈 CBSL Tightens Lending Rules on Gold and Motor Vehicles to Curb Systemic Risk

The Central Bank of Sri Lanka (CBSL) has introduced stricter Loan-to-Value (LTV) ratios effective 25 May 2026. This macroprudential move aims to promote prudent lending, safeguard financial institution resilience, and mitigate vulnerabilities arising from rapid credit expansion and volatile asset prices. • New Restrictions: A maximum LTV ratio of 70% is introduced for credit facilities secured by gold collateral. This applies to all new and renewed facilities at Licensed Banks and Licensed Finance Companies. • Motor Vehicle Sector: Existing maximum LTV limits for motor vehicle financing have been tightened by 10 percentage points. • Key Drivers: CBSL cited recent significant credit growth in gold-backed lending and vehicle financing. External factors like geopolitical uncertainties, gold price volatility, exchange rate fluctuations, and a temporary vehicle import surcharge could artificially inflate collateral values, increasing underlying credit risks.