The Central Bank of Sri Lanka (CBSL), acting in its role as the country’s macroprudential authority, has announced new limits on loan-to-value (LTV) ratios for vehicle financing. The revised regulations apply to licensed commercial banks, licensed specialized banks, licensed finance companies (LFCs), and registered finance leasing establishments (RFLEs).
Effective from November 8, credit facilities granted for the purchase or use of motor vehicles must follow the new maximum LTV caps. Under the latest framework, the maximum LTV ratio has been set at 70% for commercial vehicles and 50% for private vehicles.
This marks a change from the previous structure introduced in July, which categorized vehicles into four groups with varying limits (80% for commercial vehicles, 60% for private vehicles, 50% for three-wheelers, and 70% for other vehicle types). The updated policy consolidates these into two main categories: commercial vehicles, and all other vehicles such as cars, vans, and three-wheelers.
The CBSL stated that the move aims to ensure financial stability and responsible lending practices across the country’s banking and finance sectors.
