In a decisive move to strengthen macroprudential policy and alleviate systemic financial threats, the Central Bank of Sri Lanka (CBSL), acting as the Macroprudential Authority, has issued brand-new Directions to licensed banks to impose optimum caps on loan-to-value (LTV) ratios for vehicle-related credit facilities.The instruction, 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 chance supplied based upon the 2018 guidelines to acquire financing centers of up to 90% of the value of the lorry under the electric classification has been lowered to 80% for industrial cars, 60% for motor cars and trucks, SUVs and vans, 50% for three-wheelers and 70% for other vehicles.The procedure is developed to harmonise existing LTV caps across institutions and strengthen sensible lending practices, particularly for credit extended for the purchase or utilisation of motor vehicles, the Central Bank of Sri Lanka (CBSL) stated in a statement.Accordingly, credit centers given by every licensed bank, LFC and RFLE for the purpose of purchase or utilisation of motor vehicles will not go beyond the following percentages of the worth of such automobiles:(i) 70 percent in respect of authorized automobiles which have been utilized in Sri Lanka for more than one year after the very first registration.(ii) (a) In regard of unregistered lorries and authorized vehicles which have actually been utilized in Sri Lanka for less than one year after the very first registration;(b) In respect of Letters of Credit (LCs) opened prior to the effective date of this Direction, for which credit facilities have not yet been availed under Direction 2, I(ii)(a) above for unregistered lorries, transitional arrangements in Annexure I shall apply.Other Credit Facilities for VehiclesLicensed banks, LFCs, and RFLEs shall not give credit centers for the purpose of purchase or utilisation of automobile, aside from credit facilities granted in accordance with the directions above.Interpretations1.
Credit centers will consist of financing leases, work with purchase centers, automobile loans and any other kind of credit facilities or accommodation given for the function of purchase or utilisation of automobiles by end-users.2.
(a) Licensed Commercial Banks and Licensed Specialised Banks will have the meanings designated to such terms under the Banking Act, No.
30 of 1988(b) Licensed Finance Companies will imply finance business certified in terms of the Finance Business Act, No.
42 of 2011 to carry on finance company(c) Registered Finance Leasing Establishments will indicate business registered within the significance of the Finance Leasing Act, No.
56 of 2000 to carry on finance leasing business3.For the purpose of these Directions, the worth of the lorry shall be the market worth.
Licensed banks, LFCs and RFLEs may utilize the following in determining the value of cars:(i) Unregistered Vehicles:(a) Brand brand-new lorries.
representatives -Value verified by authorised(b) Reconditioned cars - Valuation thought about at the time of Customs clearance or invoice value given by the dealer(ii) Registered/used automobiles - Valuation provided by an expert valuer4.
Licensed banks, LFCs and RFLEs will ensure that the appraisal obtained at the time of granting credit centers supplies a real and fair value.In respect of Letters of Credit (LCs) opened prior to the reliable date of these Directions, (i.e.
prior to 18 July 2025), for which credit facilities have actually not yet been availed under Direction 2, 1(ii)(a) for unregistered automobiles, certified banks, LFCs and RFLEs will not exceed the following percentages referred to in Table 1.1 on the worth of such cars, when giving credit centers.