LNP – Sri Lanka’s Central Bank imposes new caps on vehicle loan ratios

In a decisive move to strengthen macroprudential policy and mitigate systemic financial risks, the Central Bank of Sri Lanka (CBSL), acting as the Macroprudential Authority, has issued new Directions to licensed financial institutions to impose maximum caps on loan-to-value (LTV) ratios for vehicle-related credit facilities.

The directive, which takes effect from 18 July 2025, applies to all Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies (LFCs), and Registered Finance Leasing Establishments (RFLEs). 

Thereby, the opportunity provided based on the 2018 guidelines to obtain financing facilities of up to 90% of the value of the vehicle under the electric category has been reduced to 80% for commercial vehicles, 60% for motor cars, SUVs and vans, 50% for three-wheelers and 70% for other vehicles.

The measure is designed to harmonise existing LTV caps across institutions and reinforce prudent lending practices, particularly for credit extended for the purchase or utilisation of motor vehicles, the Central Bank of Sri Lanka (CBSL) said in a statement.

Accordingly, credit facilities granted by every licensed bank, LFC and RFLE for the purpose of purchase or utilisation of motor vehicles shall not exceed the following percentages of the value of such vehicles:

(i) 70 per cent in respect of registered vehicles which have been used in Sri Lanka for more than one year after the first registration.

(ii) (a) In respect of unregistered vehicles and registered vehicles which have been used in Sri Lanka for less than one year after the first registration;