The Central Bank of Sri Lanka has lowered the maximum loan-to-value ratios for motor vehicle loans with effect from Monday, 25 May.

The existing LTV limits have been reduced by 10 percentage points, limiting the amount banks and finance companies can lend against the value of a vehicle.

For unregistered vehicles and vehicles used in Sri Lanka for less than one year after first registration, the maximum LTV ratio is now 60% for commercial vehicles and 40% for cars, SUVs, vans, three-wheelers, and other vehicles.

The CBSL said the decision was taken after considering the recent growth in motor vehicle financing and the possible impact on the financial system if the trend continues. It also said exchange rate movements and the temporary increase in the surcharge on vehicle imports could raise vehicle prices in the short term and affect collateral values.