November 09, Colombo (LNW): The Central Bank of Sri Lanka has introduced stricter borrowing limits for vehicle financing, directing banks and financial institutions to enforce new maximum loan-to-value (LTV) ratios from 8 November onwards.
Under the revised framework, loans or leasing facilities for the purchase or use of commercial vehicles must not exceed 70 per cent of the vehicle’s value, while facilities for private vehicles will now be capped at 50 per cent. The move forms part of the Central Bank’s broader macroprudential measures aimed at ensuring responsible lending and curbing excessive credit exposure in the motor sector.
The Central Bank, acting in its role as the country’s Macroprudential Authority, has issued these directions to licensed commercial and specialised banks, finance companies, and registered leasing establishments. Officials said the latest decision follows a comprehensive review of market conditions and risk factors linked to vehicle financing.
The new structure replaces the more detailed four-tier categorisation introduced in July, which had set separate ratios for cars, three-wheelers, and other vehicle types. The simplified classification now consolidates all non-commercial vehicles—including cars, vans, and three-wheelers—under a single category.
According to the Central Bank, the revision is expected to promote greater financial discipline among lenders and borrowers, reduce speculative demand in the motor market, and align credit growth with the country’s overall economic stability objectives.
Financial institutions have been advised to ensure full compliance with the new lending limits and to update their internal credit evaluation processes accordingly.
