The Central Bank of Sri Lanka (CBSL) has introduced new regulations imposing strict maximum Loan-to-Value (LTV) ratios for loans and leasing facilities granted for the purchase or use of motor vehicles.

Issued under Section 105(1) of the Central Bank of Sri Lanka Act No. 16 of 2023, the directive aims to regulate credit flowing into the vehicle market and applies to all CBSL-regulated financial institutions, including Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies and Registered Finance Leasing Establishments.

Under the new rules, which come into effect from May 25, 2026, financing for vehicles registered in Sri Lanka and used for more than one year after initial registration will be capped at 60 percent of the vehicle’s market value.

For unregistered vehicles and vehicles registered for less than one year, separate caps have been introduced based on vehicle categories defined by the Department of Motor Traffic.

Commercial vehicles, including light trucks, single cabs and larger transport vehicles, will be eligible for a maximum LTV ratio of 60 percent.

Meanwhile, financing for personal vehicles such as motor cars, SUVs, vans, three-wheelers and motorcycles has been limited to a maximum of 40 percent of the vehicle value.

The CBSL has also introduced transitional provisions for unregistered vehicles linked to Letters of Credit opened before May 25, 2026, where credit facilities have not yet been obtained.