Central Bank imposes a 70% gold pawning loan limit from May 25 to strengthen lending standards and protect financial stability.
Central Bank gold pawning limits have been tightened, with new rules capping loans granted against gold collateral at 70%.
The Central Bank of Sri Lanka has taken steps to limit the maximum Loan-to-Value ratio for credit facilities granted against gold collateral to 70%.
The move is aimed at ensuring the stability of the country’s financial system and managing financial risks.
The new directives have been issued under Section 105(1) of the Sri Lanka Central Bank Act No.16 of 2023.
They were signed by Central Bank Governor Dr. P. Nandalal Weerasinghe in his capacity as the macro-prudential authority.
The order applies to all licensed commercial banks, licensed specialised banks, and licensed finance companies.
It will come into effect from May 25, 2026.
Accordingly, the maximum 70% limit will apply to new gold loans granted from that date.
It will also apply to existing credit facilities being renewed.
Pawning facilities, gold loans, and any other loan or financial facility provided against gold collateral are included under the new order.
For the purpose of the directive, the value of gold will be considered as its market value.
Banks and finance companies must ensure that valuations conducted when granting credit facilities reflect the correct and fair value of the gold collateral.
Financial institutions have also been advised to continue following the prudential practices currently used for valuing gold collateral.
The Central Bank emphasized that the objective is to strengthen the safety of the overall financial system.
It said this will be done by strengthening the lending standards of financial institutions.
