CBSL Cuts How Much You Can Borrow Against Gold and Vehicles

COLOMBO (News 1st); The Central Bank of Sri Lanka (CBSL) has decided to tighten lending rules on loans taken against gold and on motor vehicle financing, with the new rules coming into effect from 25 May 2026. The move is aimed at promoting more careful lending by banks and finance companies, and protecting the stability of the financial system.

In recent months, there has been a sharp rise in loans given against gold and in vehicle financing. CBSL’s Governing Board is worried that if this rapid growth continues, it could create risks for both lenders and borrowers in the future. At the same time, global political and economic tensions have increased uncertainty and caused big swings in asset prices, including the price of gold, while the exchange rate has also been volatile. The Central Bank notes that a temporary increase in the surcharge on vehicle imports, along with exchange rate movements, could push up vehicle prices for a while, which in turn affects the value of the vehicles used as collateral.

To address these risks, CBSL has introduced a maximum loan-to-value (LTV) ratio of 70 per cent for loans secured by gold. This means a bank or finance company can now lend up to only 70 per cent of the value of the gold pledged as collateral. This rule will apply not only to new loans, but also when existing gold-backed loans are renewed on or after 25 May 2026.

The Central Bank has also tightened the existing LTV limits on loans for motor vehicles by 10 percentage points. This effectively reduces the maximum portion of a vehicle’s value that can be financed through a loan.