Sri Lanka to amend State Mortgage and Investment Bank Act after the cabinet of ministers approved a proposal aimed at modernizing the legal framework governing the state-owned financial institution and improving its long-term profitability.
Sri Lanka to amend State Mortgage and Investment Bank Act to improve profitability
The proposed amendments are expected to align the operations of the State Mortgage and Investment Bank (SMIB) with current market conditions while strengthening its ability to achieve its institutional and commercial objectives.
According to a cabinet statement, the government has identified several limitations within the existing legal structure of the bank that have restricted its operational flexibility and affected its ability to maintain expected profit levels in an increasingly competitive financial environment.
The State Mortgage and Investment Bank was established under Act No. 13 of 1975 and officially commenced operations in January 1979. The institution was formed through the merger of two entities operating at the time — the Ceylon Mortgage Bank and the Agricultural and Industrial Credit Corporation.
Since its establishment, the bank has played a role in providing long-term financing solutions for housing, agriculture, industry, and development-related activities. However, officials now believe that the legislative framework governing the bank has become outdated compared to the evolving requirements of the modern financial sector.
The cabinet statement noted that “due to certain limitations of the current Act, the Bank has not been able to achieve its objectives and maintain its expected profits.”
Authorities said reforms are necessary to ensure that the bank remains commercially sustainable while continuing to support broader economic and development priorities.
The decision comes at a time when the Sri Lanka banking sector is undergoing structural adjustments amid changing economic conditions, regulatory reforms, and increased competition among state-owned and private financial institutions.
Industry analysts say state-owned banks and specialized financial institutions are facing growing pressure to improve operational efficiency, strengthen profitability, and modernize governance frameworks to remain competitive in the market.
The proposed amendments are expected to provide SMIB with greater flexibility in business operations, lending structures, investment strategies, and institutional management. While specific reforms have not yet been publicly detailed, officials indicated that the revised legislation would be designed to support the bank’s long-term sustainability and commercial performance.
The Legal Draftsman has already been instructed to prepare a draft bill amending the 1975 Act. The proposed legislation will later be submitted to Parliament for approval before implementation.
Financial sector observers note that updating outdated banking legislation has become increasingly important as Sri Lanka seeks to strengthen investor confidence and improve the efficiency of state-linked institutions.
The move to modernize the bank’s governing framework is also seen as part of broader efforts to reform public sector enterprises and financial institutions following Sri Lanka’s recent economic crisis. Policymakers have increasingly emphasized governance reforms, financial discipline, and institutional restructuring across several sectors of the economy.
The Sri Lanka to amend State Mortgage and Investment Bank Act initiative may also support efforts to expand financing opportunities in areas such as housing development, infrastructure, agriculture, and small and medium-sized enterprises.
Analysts say specialized financial institutions like SMIB continue to hold strategic importance because of their role in supporting long-term development financing that may not always be fully addressed through commercial banking channels alone.
The reform proposal has also generated interest among banking professionals who believe legal modernization could improve the institution’s competitiveness within the wider financial services market.
In recent years, Sri Lanka’s financial institutions have faced multiple challenges including economic instability, rising borrowing costs, regulatory adjustments, and changing customer expectations. Against this backdrop, policymakers are increasingly focusing on improving operational adaptability within state-owned entities.
The Sri Lanka banking sector is expected to continue evolving as authorities pursue reforms aimed at improving financial stability, encouraging investment, and enhancing institutional resilience.
Government officials have not provided a timeline for parliamentary approval of the proposed amendments. However, market analysts believe the reform process could signal broader intentions to modernize additional state-linked financial institutions in the future.
The Sri Lanka to amend State Mortgage and Investment Bank Act proposal is likely to remain under close observation within the financial community as stakeholders assess the potential impact of the reforms on the bank’s operations and profitability.