The Central Bank of Sri Lanka (CBSL) has capped lending against gold collateral at 70% of its value, in a fresh macroprudential move to contain rapid growth in gold-backed credit.
Under Central Bank of Sri Lanka Act Directions No. 02 of 2026, signed by Governor Dr P. Nandalal Weerasinghe, licensed commercial banks, licensed specialised banks and licensed finance companies must ensure that credit facilities secured by gold do not exceed 70% of the collateral’s value. The cap takes effect on 25 May 2026 and also applies to existing facilities renewed on or after that date.
The directions define “credit facilities” broadly to include pawning facilities, gold loans and any other credit extended against gold collateral. Lenders have also been instructed to maintain prudent valuation practices so that pledged gold reflects a true and fair market value.
CBSL said the measure was issued under Section 105(1) of the Central Bank of Sri Lanka Act No. 16 of 2023 to strengthen financial system stability and mitigate systemic risks. The bank pointed to a sharp rise in gold-backed lending in recent months and warned that volatile global gold prices and exchange-rate swings could erode the value of collateral held against such loans.
The gold cap was issued alongside a parallel tightening of vehicle financing limits, which the Central Bank cut for the second time in six months — also effective May 25. NewsFirst reported that the two measures were contained in a single direction covering both gold and vehicle credit.
Together they mark the Central Bank’s third lending-cap tightening this cycle, narrowing the credit channels through which household borrowing has expanded as gold prices and vehicle imports surged.
