Monday Aug 03, 2026
Monday Aug 03, 2026
Monday, 3 August 2026 00:26 - - {{hitsCtrl.values.hits}}
The Central Bank of Sri Lanka (CBSL) has directed all Licensed Finance Companies (LFCs) to strictly comply with its 2026 Loan-to-Value (LTV) Directions for motor vehicle financing, warning that inflated vehicle valuations and financing structures designed to bypass regulatory limits pose risks to the financial system.
In a directive issued to Chief Executive Officers of all LFCs, the CBSL said it had observed instances where valuations provided by motor vehicle valuers and invoices issued by vehicle sellers significantly exceeded prevailing market prices.
The CBSL said such practices resulted in the misrepresentation of asset values and created risks to the financial system.
Accordingly, it instructed all LFCs to strictly comply with Direction 4.4 of the Central Bank of Sri Lanka Act Directions, No. 01 of 2026 when conducting and accepting motor vehicle valuations.
The regulator also warned against the use of alternative or bridging financing arrangements to facilitate the purchase or utilisation of motor vehicles in a manner that could undermine the intent and effectiveness of the LTV Directions.
It said such bridging financing arrangements, when provided alongside primary credit products including finance leases, hire purchase agreements, and motor vehicle loans, fall within the scope of the Directions.
The CBSL instructed finance companies not to disburse, structure, or facilitate any financing, whether directly or indirectly, that results in a breach of the prescribed LTV limits.
The CBSL reminded financial institutions that macroprudential policy measures are implemented to safeguard financial system stability based on comprehensive assessments of systemic risks.
It said such policy decisions are taken in the broader national interest with the objective of promoting long-term financial stability and resilience.
The regulator cautioned that behaviour driven by short-term profit considerations that compromises the effectiveness of macroprudential measures could contribute to the build-up of systemic vulnerabilities and would be viewed as conduct contrary to expected prudential objectives.
The CBSL said all LFCs are expected to exercise the highest degree of prudence and ensure full compliance with the Directions in both form and substance.
The directive was issued by the Macroprudential Surveillance Department of the CBSL dated 28 July 2026.
