LTV limits to remain for vehicle imports: CBSL, with the Central Bank confirming that the existing loan-to-value restrictions on motor vehicle financing and gold-backed loans will continue as part of its macroprudential policy framework to safeguard financial stability.
LTV limits to remain for vehicle imports: CBSL amid prudent lending measures
Speaking at the post-Monetary Policy Review media briefing, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe said the lending restrictions will remain in force to encourage responsible borrowing, strengthen risk management practices and support the resilience of the country’s financial system.
The Governor made the remarks in response to questions on whether the expected moderation in vehicle imports would depend on changes to the recently introduced vehicle import surcharge or the continuation of tighter loan-to-value (LTV) limits.
According to Dr. Weerasinghe, there is currently no indication from the Government that it intends to revise or suspend the surcharge imposed on imported vehicles.
He clarified that the surcharge falls under the authority of the Ministry of Finance and is therefore a Government policy decision rather than one determined independently by the Central Bank.
“The CBSL cannot commit to whether the surcharge will be retained or removed, as any decision would be made by the Finance Ministry in consultation with the CBSL,” Dr. Nandalal Weerasinghe said.
While the future of the surcharge remains a fiscal policy matter, the Governor emphasised that the continuation of LTV restrictions is based on broader financial sector considerations rather than import policy alone.
The loan-to-value framework limits the proportion of a vehicle’s value that can be financed through bank or finance company lending. By requiring borrowers to make a larger upfront contribution, the policy is intended to discourage excessive credit expansion while reducing potential risks to lenders and the wider financial system.
The Central Bank has also maintained similar LTV restrictions on gold-backed loans as part of its macroprudential toolkit, reflecting its broader objective of promoting prudent lending standards across the banking and finance sectors.
LTV limits to remain for vehicle imports: CBSL as policymakers continue balancing renewed economic activity with financial sector stability. Following the reopening of vehicle imports, authorities have introduced a range of measures aimed at managing demand while ensuring that increased lending does not create excessive risks for financial institutions.
The continuation of these restrictions also comes as private sector credit has expanded rapidly in recent months, prompting the Central Bank to maintain a cautious policy stance. Officials have indicated that macroprudential measures complement monetary policy by helping moderate credit growth in sectors where lending demand could accelerate.
Industry analysts note that LTV restrictions are commonly used by central banks to limit excessive leverage during periods of strong credit growth. Such measures help financial institutions maintain healthier loan portfolios while reducing borrowers’ exposure to debt-related risks.
For prospective vehicle buyers, the policy means financing conditions are expected to remain broadly unchanged in the near term, with banks and finance companies continuing to apply existing lending limits.
LTV limits to remain for vehicle imports: CBSL as the Central Bank reiterates its commitment to prudent lending practices, stronger risk management and long-term financial system stability, while any future decision regarding the vehicle import surcharge will rest with the Ministry of Finance in consultation with the monetary authority.