The Central Bank of Sri Lanka issued macroprudential Directions under the Central Bank of Sri Lanka Act introducing maximum caps on loan-to-value (LTV) ratios for credit facilities granted to purchase or utilise motor vehicles. The requirements apply to Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies and Registered Finance Leasing Establishments, with effect from 18 July 2025. For registered vehicles used in Sri Lanka for more than one year after first registration, credit is capped at 70% of the vehicle’s market value. For unregistered vehicles and registered vehicles used for less than one year, the caps are 80% for commercial vehicles (including specified Department of Motor Traffic classes and light trucks under class B), 60% for motor cars, SUVs and vans (class B excluding light trucks and single cabs), 50% for three-wheelers (B1), and 70% for any other vehicle (A1, A and single cabs under class B). The Directions define “credit facilities” to include finance leases, hire purchase, vehicle loans and any other accommodation to end-users, and prohibit vehicle-related credit outside the specified framework. Market value must be used for LTV calculations, using authorised agent confirmation for brand new vehicles, customs clearance valuation or dealer invoice value for reconditioned vehicles, and a professional valuer’s valuation for registered or used vehicles. Transitional provisions apply where letters of credit were opened before 18 July 2025 for unregistered vehicles but credit has not yet been availed, including LTV caps of 90% for electric vehicles across most categories, with lower caps for other vehicles in certain segments (50% for motor cars, SUVs and vans and 25% for three-wheelers), and a 50% cap specified for hybrid motor cars, SUVs and vans.
Central Bank of Sri Lanka 2025-07-17
Central Bank of Sri Lanka imposes maximum loan-to-value caps on motor vehicle credit from banks and finance firms
The Central Bank of Sri Lanka issued macroprudential Directions under the Central Bank of Sri Lanka Act, setting maximum loan-to-value (LTV) ratios for motor vehicle credit facilities, effective 18 July 2025. LTV caps vary by vehicle type and registration status, with specific percentages for commercial vehicles, motor cars, SUVs, vans, three-wheelers, and others. Transitional provisions apply to letters of credit opened before the effective date, with distinct caps for electric and hybrid vehicles.