Sri Lankan banks have raised fresh red flags over the growing threat of phishing scams targeting online banking users, even as a new Central Bank report shows that lending sentiment in the financial sector remains at its strongest in over a year.
In notices issued this week, several commercial banks cautioned customers about fraudulent emails and text messages containing links to counterfeit websites designed to steal personal and financial data. These fake portals, often mimicking official bank sites, use slight spelling variations or unusual characters to mislead unsuspecting users.
Banks have urged customers to remain vigilant by avoiding suspicious links, directly typing official web addresses into their browsers, and verifying URLs carefully before entering login credentials. They also stressed the importance of reporting any suspicious activity immediately.
While online security remains a pressing concern, the banking industry is experiencing renewed optimism on the lending front. According to the Central Bank of Sri Lanka’s (CBSL) latest Credit Supply Survey, the sector’s Willingness to Lend Index climbed to 59.6 in the second quarter (Q2) of 2025, the highest level in five quarters, reflecting strong economic and financial stability.
The index, a gauge of banks’ confidence in extending credit, has been supported by lower interest rates, stable liquidity positions, and rising consumer confidence. Loan demand in Q2 expanded on the back of higher wages, resumed vehicle imports, and improved business activity. Private sector borrowing surged by Rs. 221.5 billion in June alone, pushing the outstanding stock above Rs. 8.85 trillion.
Government borrowing, by contrast, was more modest at Rs. 98 billion, while credit to public corporations fell slightly. Economists say this pattern indicates that the recovery is being driven primarily by private sector demand rather than state-led borrowing.
Non-performing loans (NPLs) also eased in Q2, supported by lower interest rates, stronger collections, and flexible repayment schemes. Defaults fell across corporate and SME sectors, though retail borrowers showed slight stress due to higher living costs. CBSL expects the declining trend in NPLs to continue into Q3 as financial conditions remain favourable. Loan rejections, too, fell in Q2 as borrower quality improved, and are expected to ease further.
Despite this upbeat picture, the Central Bank cautioned that the Willingness to Lend Index may dip to 41.4 in Q3, reflecting a moderation after the recent surge. Lending to Small and Medium Enterprises (SMEs) also remains constrained. Although Government-backed concessional loan schemes and guarantees are in place, disbursement has been minimal. Officials have criticised banks for being overly cautious in extending risk capital to smaller firms, leaving them on the margins of the recovery.
The CBSL has emphasized that this cycle of credit growth is structurally different from past recoveries. Unlike earlier periods when excess liquidity was created by money printing to finance state deficits—fueling inflation and currency instability—the current surplus stems from foreign exchange purchases that boosted reserves to $6 billion by June.
Analysts say this shift, coupled with fiscal reforms and stronger central bank independence, could mark a turning point for Sri Lanka’s financial sector. However, with phishing scams on the rise and SME financing lagging, banks face a dual challenge: protecting customer trust while ensuring credit reaches all corners of the economy.
