The Central Bank of Sri Lanka (CBSL) has introduced maximum loan-to-value (LTV) limits for credit facilities secured against gold collateral, citing concerns over financial system stability and growing exposure to gold-backed lending.

The CBSL said the measure was introduced under its macroprudential mandate to strengthen financial system stability, mitigate systemic risks, and reinforce prudent lending standards among institutions regulated and supervised by the Central Bank.

According to the CBSL, the decision was also influenced by the significant recent growth in gold-backed loan facilities and the potential risks such trends could pose to the financial system if left unchecked.

Accordingly, with effect from today (25), all licensed commercial banks, licensed specialised banks, and licensed finance companies are required to restrict loans granted against gold collateral to a maximum of 70% of the value of the pledged gold.