The Central Bank of Sri Lanka (CBSL) has issued new directions imposing a maximum loan-to-value (LTV) ratio of 70% for credit facilities secured by gold collateral, in a move aimed at strengthening financial system stability and mitigating systemic risks.Under the new Central Bank of Sri Lanka Act Directions No. 02 of 2026, issued by CBSL Governor Dr. P. Nandalal Weerasinghe, licensed commercial banks, licensed specialised banks, and licensed finance companies will be required to ensure that credit facilities backed by gold do not exceed 70% of the value of the collateral.The directions will come into effect from 25 May 2026 and will also apply to existing credit facilities renewed on or after the effective date.

CBSL said the move was introduced under Section 105(1) of the Central Bank of Sri Lanka Act, No. 16 of 2023, as part of its macroprudential measures to reinforce prudent credit standards in regulated financial institutions.The directions further clarify that the term “credit facilities” includes pawning facilities, gold loans, and any other form of credit extended against gold collateral. Banks and finance companies have also been instructed to continue applying existing prudent valuation practices to ensure the gold collateral reflects a true and fair market value