Regulatory Alerts2017-05-31 | Banking Act Directions No. 4 of 2017Amendment to Directions on Loan-to-Value Ratios for Motor Vehicle Credit Facilities
The Central Bank of Sri Lanka amends Banking Act Directions 5.1 and 5.4 to establish updated loan-to-value (LTV) ratios for motor vehicle credit facilities, explicitly defining these facilities to encompass finance leases and hire purchase arrangements for end-users. The revised framework assigns specific LTV caps according to Department of Motor Traffic classifications, mandating 90 percent for commercial vehicles, 50 percent for motor cars, SUVs and vans, 25 percent for three-wheelers, and 70 percent for all other vehicle categories. These standardized ratios directly regulate the maximum loan amounts financial institutions may extend across distinct vehicle classes to mitigate credit risk.
MONETARY BOARD CENTRAL BANK OF SRI LANKA
31 May 2017 BANKING ACT DIRECTIONS No. 04 of 2017
AMENDMENT TO DIRECTIONS ON THE LOAN TO VALUE RATIOS FOR CREDIT FACILITIES IN RESPECT OF MOTOR VEHICLES
The Directions 5.1 and 5.4 of the Banking Act Directions No. 02 of 2017 on Amendment to Directions on the Loan to Value Ratios for Credit Facilities in Respect of Motor Vehicles are amended by replacing the following:
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Interpretations 5.1 Credit facilities shall mean finance leases, hire purchase facilities and all other credit facilities granted for the purpose of purchase or utilisation of vehicles by end-users.
5.4 The vehicle classes provided by the Department of Motor Traffic (DMT) may be categorised for the purpose of the Direction as in Table 1 below:
Table 1 – Categorisation of DMT Vehicle Classes
| Vehicle Category | Vehicle Class of DMT | LTV |
|---|---|---|
| Commercial vehicles | C1, C, CE, D1, D, DE, G1, G, J | 90% |
| Motor Cars, SUVs and Vans | B (other than light trucks & single cabs) | 50% |
| Three wheelers | B1 | 25% |
| Any other vehicle | A1, A, light trucks & single cabs categorized under B | 70% |
(Signature)
Dr. Indrajit Coomaraswamy Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka