Loan acquisition through commercial banks in Sri Lanka reached a record high

According to the latest data reports released by the Central Bank of Sri Lanka, it is confirmed that the country's business community and household consumers resorted to obtaining a record amount of loans through commercial banks during the past March. The issuance of loans by commercial banks to the private sector, which stood at LKR 144.4 billion in February, has nearly doubled to LKR 258.4 billion by the end of March.

This value is notably very close to the all-time highest monthly loan issuance of LKR 262.6 billion recorded in November last year.

With this rapid growth, the total private sector credit expansion in the first quarter of the current year has increased to LKR 485.4 billion, which is a 27.1 percent increase compared to the previous year. Due to the favorable economic environment created in the country after the economic crisis and lower interest rates, over LKR 2 trillion, the highest amount of loans in history, had also been issued in 2025. These loans have been obtained for business expansion, import requirements, working capital fulfillment, as well as housing and vehicle purchases. Economic analysts point out that this is a positive factor indicating confidence in the domestic economy and a revival of economic activities.

However, the rise in crude oil prices in the world market due to the Iranian military situation that emerged in late February has once again posed a new challenge to Sri Lanka's post-crisis economic recovery process. With the Colombo Consumer Price Index rapidly increasing from 2.2 percent to 5.4 percent by April, it is suspected that businesses may have been prompted to quickly secure necessary funds in anticipation of further increases in borrowing costs. Concurrently, the Average Weighted Prime Lending Rate (AWPLR), a key indicator for commercial loans, has increased by 44 basis points since the start of the military situation, reaching 9.79 percent.

With the increase in demand for foreign exchange in the market, the value of the Rupee is depreciating again against the US Dollar, and the selling price of a dollar at some commercial banks has risen to around LKR 330. As the weakening of the Rupee poses a risk of increasing import costs, including fuel, which could eventually translate into an overall increase in interest rates, the banking sector is adopting a stringent approach regarding customers' ability to repay loans. For this reason, several banks have increased their provisions for the March quarter with the aim of covering potential future loan losses, and the entire financial market is closely watching the Central Bank of Sri Lanka's next monetary policy statement, which is expected to be released later this month, to get a clear picture of future borrowing costs.