Sri Lankan banks' loan-to-deposit ratio reaches 74% as credit outpaces funding

Sri Lanka's banking-sector credit-to-deposit ratio reached 74 per cent at the end of June 2026, moving above 70 per cent for the first time in three years, according to the central bank's Financial Stability Review. The report flags lending growing faster than deposits as a trend requiring continued monitoring.

The ratio had been 63.9 per cent at the end of 2024 and 69.9 per cent at the end of 2025. It remains below the 82.7 per cent recorded at the end of 2021. Part of the increase reflects a recovery in lending after the weakness that followed the economic crisis.

Bank credit grew 23.6 per cent year on year by the end of the second quarter, compared with 11.4 per cent a year earlier. Retail funding, including demand, savings and term deposits, rose 6.7 per cent. The central bank warns that a persistent gap could increase funding pressure and reduce liquidity buffers.

The rupee liquidity coverage ratio fell from 328.5 to 272.5 per cent over a year, but remained above regulatory minimums. The report links the decline partly to assets shifting from government securities into private lending. It also highlights risks in rapidly expanding consumer and pawning loans, including the effect a sharp fall in gold prices could have on collateral values.