Credit growth in the Finance Companies (FCs) sector has increased significantly due to rising demand for vehicle financing and gold-backed lending, according to the Central Bank of Sri Lanka’s (CBSL) Financial Stability Review 2026.
The CBSL stated that the private sector credit gap had continued to widen due to rising household debt alongside this credit growth.
The report also noted that this situation signals a ‘potential build-up of systemic vulnerabilities.’
‘Moreover, although financial sector exposure to the public sector reduced, it remained significant, underscoring the considerable sovereign-financial sector nexus. Rising household indebtedness, volatility in collateral values with increased exposure to collateral-backed lending, the continued rise in real estate prices and inflationary pressures further highlighted emerging risks, the report states.
‘In response to these developments, the Central Bank increased the overnight policy interest rate in May 2026 and introduced macroprudential measures, including loan-to-value (LTV) limits on vehicle and gold-backed lending, aimed at containing the build-up of vulnerabilities within the economy,’ it adds.
According to CBSL data, total credit growth in the FCs sector reached 52.4% year-on-year by the end of the first quarter of 2026.
According to the data, vehicle-backed loans grew by 52.8%, while gold-backed loans increased by 69.2%.