Tuesday Apr 07, 2026
Tuesday Apr 07, 2026
Tuesday, 7 April 2026 01:59 - - {{hitsCtrl.values.hits}}
CBSL Governor Dr. Nandalal Weerasinghe
The Central Bank of Sri Lanka (CBSL) has signalled a clear push towards consolidation in Sri Lanka’s banking sector, with Governor Dr. Nandalal Weerasinghe warning that weaker institutions will be compelled to merge if they fail to strengthen their balance sheets within the next few years.
Speaking at a recent AmCham CEO Forum, Dr. Weerasinghe said it was difficult to specify an exact number of banks required, but indicated that the current structure of multiple small and mid-sized institutions alongside larger players would need to evolve.
“I think it is difficult for me to say this is the exact number of banks we need to have,” he said, noting that the system comprises private sector banks of different sizes and foreign bank branches rather than fully established foreign banks.
He said the immediate priority is consolidation within the State banking sector, with policy support already in place to merge smaller State banks with larger ones to improve scale and competitiveness.
“I see also here the Government is supportive of consolidating some of the small State banks with the bigger State banks. That is important to make those banks able to compete with the bigger banking business–the private and foreign banks,” he said.
While some smaller banks serving specific communities may remain, others would need to be absorbed to strengthen the overall State bank structure, he added.
On private sector banks, Dr. Weerasinghe said the CBSL has set out a clear agenda to build larger and stronger institutions, supported by defined capital and balance sheet targets.
“We would like to see stronger, bigger private banks,” he said, adding that regulators will intervene if progress is not made.
“Within the next couple of years, if banks are not moving and strengthening their balance sheets and ratios to a certain level, there will be no choice. We will be encouraging and basically making them merge to make stronger private sector banks,” he said.
He also pointed to the role of foreign bank branches, noting that while many are active, their operations remain limited in scale and scope.
“We would like to encourage them to deploy their capital much more,” he said, adding that foreign banks should expand their presence in areas where they have competitive strengths.
The Governor said some foreign banks have shifted away from retail banking due to competition from local players, describing this as a natural transition, but stressed that greater participation is needed.
