The Central Bank of Sri Lanka issued Finance Business Act directions introducing a methodology and caps for the maximum interest rates that licensed finance companies may offer or pay on Sri Lankan rupee (LKR) deposits and debt instruments. The limits are tied to Treasury bill weighted average yield rates (WAYR) and the Overnight Policy Rate (OPR) and take effect from 1 July 2025 for existing and new savings deposits, new time deposits and debt instruments, and renewals of time deposits and debt instruments. For time deposits and other innovative deposits with tenors from one month to three years, maximum annual nominal rates (where interest is paid at maturity) are set at the relevant Treasury bill WAYR plus margins ranging from 0.10 percentage points for 1–3 month deposits to 3.00 percentage points for three-year deposits. For products with periodic interest payments, annual effective rates (AER) must not exceed the same caps. Savings deposits and deposits of less than one month or with no specified maturity are capped at the OPR, with children’s savings deposits (under 18) and senior citizens’ time deposits of one year or more permitted up to 50 basis points above the standard caps. For debt instruments, maximum annual nominal rates (interest paid at maturity) are capped at the 364-day T-bill WAYR plus 0.50 percentage points for maturities under one year, increasing to 3.50 percentage points for three-year instruments, with the same ceiling applying to AER where interest is paid periodically. The Treasury bill-based caps for time deposits, innovative deposits and debt instruments will be reviewed quarterly using the simple average WAYR of the latest four primary auctions in the preceding quarter, while the savings deposit reference rate is the OPR at the end of the preceding quarter. Finance companies must submit periodic returns on interest rates paid via the Financial Information Network Reporting System, and the 2019 maximum-rate direction and the 18 April 2022 amendment letter are revoked from 1 July 2025.
Central Bank of Sri Lanka 2025-06-23
Central Bank of Sri Lanka sets maximum interest rate caps for licensed finance companies’ LKR deposits and debt instruments from 1 July 2025
The Central Bank of Sri Lanka issued new directions under the Finance Business Act, capping interest rates for licensed finance companies' LKR deposits and debt instruments, effective 1 July 2025. Caps are linked to Treasury bill weighted average yield rates and the Overnight Policy Rate, with specific margins for different deposit tenors and debt instruments. Finance companies must report rates via the Financial Information Network Reporting System, revoking previous directives.