The move comes amid a rapid increase in lending against gold and vehicle purchases, prompting concerns over potential risks to both lenders and borrowers. According to the Central Bank, the decision is aimed at encouraging more prudent lending practices and safeguarding the stability of the country’s financial system.
CBSL noted that growing global political and economic uncertainties have contributed to significant fluctuations in asset prices, particularly gold prices, while exchange rate volatility has further increased financial risks.
In addition, the Bank observed that temporary increases in surcharges on vehicle imports, combined with currency fluctuations, could lead to higher vehicle prices. This may affect the reliability of vehicles used as collateral for loans.
New Gold Loan Limits
Under the revised regulations, CBSL has introduced a maximum loan-to-value (LTV) ratio of 70% for loans secured against gold. This means banks and finance companies will only be permitted to lend up to 70% of the assessed value of pledged gold.
The rule will apply not only to new gold loans but also to the renewal of existing gold-backed loans from 25 May 2026 onward.
Vehicle Financing Tightened
The Central Bank has also reduced the existing LTV limits on motor vehicle financing by 10 percentage points, effectively lowering the portion of a vehicle’s value that can be financed through loans.
CBSL stated that these measures are intended to minimize future financial vulnerabilities and ensure greater resilience within the banking and finance sector.
