Central Bank Imposes New Caps on Vehicle Loan-to-Value Ratios for Financial Institutions
The Central Bank of Sri Lanka (CBSL) has issued a directive to all Licensed Financial Institutions (LFIs), imposing revised maximum loan-to-value (LTV) ratio caps on vehicle-related credit facilities, with effect from July 18.
The new directive applies to Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies (LFCs), and Registered Finance Leasing Establishments (RFLEs), aiming to standardize and tighten vehicle financing regulations across the financial sector.
Under the revised guidelines, the maximum LTV ratios allowed are as follows:
- 80% for electric commercial vehicles
- 60% for motor cars, SUVs, and vans
- 50% for three-wheelers
- 70% for all other vehicles
This marks a reduction from the 90% LTV cap previously allowed for electric vehicles under the 2018 guidelines.
In its official statement, the Central Bank stated that the measure is intended to harmonise LTV caps across institutionsand strengthen prudent lending practices, especially concerning vehicle financing. The move is seen as a part of broader efforts to ensure financial system stability and prevent excessive credit risk within the sector.
