The Central Bank of Sri Lanka issued Directions requiring all finance companies licensed under the Finance Business Act to prepare, maintain and be able to execute recovery plans that set out measures to restore the firm’s financial position under severe stress, with the framework effective from 31 December 2026. Recovery plans must be aligned with the finance company’s risk appetite and risk management framework and be complementary to contingency funding plans, business continuity plans and the internal capital adequacy assessment process, while remaining distinct and focused on more severe viability-threatening events. Minimum content includes an executive summary, strategic analysis (including business model, group structure, critical functions and shared services, and an assessment of recovery capacity), governance and oversight (with board approval and a designated Key Responsible Person), recovery trigger indicators and early warning indicators, credible recovery options, and a communication strategy. Recovery options must be feasible within a reasonable timeframe, consider macroeconomic and financial crisis scenarios including environmental impacts and cyber security threats, and must not rely on extraordinary public financial support. Plans must be reviewed, tested and updated at least annually and when material changes occur or when requested by the Central Bank. Submission is required promptly when requested by the Department of Supervision of Non-Bank Financial Institutions and the Deposit Insurance and Resolution Department; identified deficiencies must be rectified by the board, and failure to adequately remediate may lead to regulatory action under the Banking (Special Provisions) Act.

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