Sri Lanka’s banks and finance companies concluded 2024 on a strong note, with a significant increase in loans disbursed to the private sector, driven by declining interest rates and a recovering economy that reignited credit demand.
According to the Central Bank of Sri Lanka’s Annual Economic Review 2024, licensed finance companies saw a substantial Rs.277.1 billion rise in outstanding private sector credit, reflecting a robust 21.0 percent growth. In comparison, licensed commercial banks extended Rs.789.6 billion in private sector credit, marking a 10.7 percent increase, a sharp recovery from 2023 when high interest rates and a contracting economy had curtailed lending.
Licensed specialized banks also saw a modest increase in private sector loans, with credit rising by Rs.27.9 billion, a 2.5 percent growth. Consumer credit was a key driver, with demand surging for gold-backed loans, personal loans, and vehicle leasing, benefiting from improved liquidity conditions throughout the year.
Private sector credit distribution across key economic sectors remained healthy, indicating stronger business confidence and a broad-based economic recovery. The industrial sector, which accounts for 39.7 percent of total outstanding private sector credit at commercial banks, grew by 8.4 percent, with significant lending across multiple subsectors such as construction, textiles, pharmaceuticals, and food.
The construction sector saw a notable 5.5 percent increase in credit flows, signaling a gradual recovery in construction activities. Meanwhile, the services sector, representing 27.4 percent of total private sector credit at commercial banks, grew by 12.3 percent, driven by wholesale trade, business services, and aviation.
The agriculture sector, accounting for 7.3 percent of total credit at commercial banks, grew by 8.2 percent, supported by improved weather conditions and a broader recovery in rural economic activities. Lending to agriculture focused on paddy cultivation, food crops, and livestock farming.
While short to medium-term credit remained higher than long-term credit, the Central Bank expects sustained growth in mid-to-long-term credit as economic activities continue to revive.
