- ADB report states the country’s NPL ratio hit 12.9% in the first half of 2024
- Elevated NPL rate is a consequence of the post-crisis financial stress and structural issues
Sri Lanka’s banking sector non-performing loan (NPL) ratio was among the highest in Asia in 2024 due to stress in the financial sector and structural issues in the aftermath of the economic crisis, an Asian Development Bank (ADB) report said.
Accordingly, Sri Lanka’s NPL volume increased modestly to $ 4.58 billion, but its NPL ratio remained elevated at 12.9% by the first half of 2024, the highest in the sample of economies analysed in Asia and up significantly from 4.5% in 2021.
Sri Lanka NPL ratio took the second place among South Asian peers and Asian peers with 12.3% by end of 2024, while Bangladesh took the first place with 21.3% and Pakistan took third place with 8.4%.
The volume of NPLs in Bangladesh by the end of last year was $ 28.35 billion, while Sri Lanka volume stood at $ 4.68 billion.
Sri Lanka’s NPL ratio further declined to 12% by the end of first of 2025.
“While East Asia and Southeast Asia have effectively maintained relatively lower NPL ratios due to stringent regulatory environments, proactive policy interventions, and robust economic performance, regions such as South Asia and Central Asia continue to grapple with higher and more persistent NPL ratios, largely influenced by structural impediments, broader economic instabilities, and commodity dependence in some countries,” ADB said.
It also said that despite rising volumes in some markets, most economies maintained stable or improving NPL ratios, though persistent stress in countries like Bangladesh, Sri Lanka, and Vietnam highlights the need for targeted reforms and stronger resolution framework.
In 2024, the total volume of NPLs across Asia reached approximately $ 700.19 billion, down marginally from $ 713.34 billion in 2023 to a broadly stable credit environment across the region.