Sri Lanka's private-sector lending figures prompt questions over investment use
Details reported on November 11 from a Committee on Public Finance discussion put private-sector credit extended during the first nine months of 2026 at Rs 2.1 trillion, compared with Rs 1.9 trillion in the same period of 2025, according to Central Bank officials.
Licensed commercial banks accounted for about 74% of the lending. The committee questioned a rise in the share of short-term loans from 42% to 47% and a fall in the long-term share from 35% to 29%.
Members asked whether credit was adequately supporting new investment, capital formation and production. Lending extended during a period is not the same measure as total outstanding credit and should not be compared directly with that stock.
Earlier report (2026-11-09)
Credit extended to the private sector by Sri Lanka's banking system rose again in September, recovering from a four-month low in August, though year-on-year growth slowed for a third consecutive month. Central Bank data shows net credit increased by 212.4 billion rupees during the month.
Outstanding private sector credit rose from 11.56 trillion rupees to 11.77 trillion rupees, while annual growth eased from 24.5 per cent to 23.6 per cent. September's increase was also 6.4 per cent smaller than the 226.8 billion rupees added in September 2025. Annual growth, which stood at 26.4 per cent in July, has now softened for three straight months.
Domestic banking units, which handle rupee business, expanded credit by 171.8 billion rupees to 11.17 trillion rupees. Offshore banking units, which handle foreign currency business, added 40.6 billion rupees to reach 597.9 billion rupees, reversing August's 33.1 billion contraction.
Net credit to the government from the banking system fell by 84.8 billion rupees to 7.65 trillion rupees, while outstanding credit to state-owned business enterprises declined by 16.9 billion rupees to 462.9 billion rupees. The banking system's net foreign assets fell by 41.9 billion rupees to 1.63 trillion rupees, the first monthly decline since early this year.
On monetary measures, reserve money held by banks with the Central Bank rose by 39 billion rupees to 1.95 trillion rupees, with annual growth accelerating from 11.8 per cent to 15.2 per cent. Narrow money M1 fell 33.8 billion rupees to 2.36 trillion, while broad money M2 rose 53.9 billion rupees to 15.09 trillion rupees.
