Regulatory Alerts2020-05-15 | Banking Act Directions No. 4 of 2020Loan to Value Ratios for Credit Facilities Granted in Respect of Motor Vehicles
The Central Bank of Sri Lanka mandates specific loan-to-value ratios for motor vehicle credit facilities extended by licensed commercial and specialized banks. The updated directions establish maximum financing percentages ranging from 50 to 90 percent based on vehicle category, registration status, and electric or hybrid classification, while requiring concessionary import permits to use proforma invoice values. These binding rules immediately supersede the May 2019 directions, standardizing credit limits for new, used, and locally assembled vehicles across all registered classes.
CENTRAL BANK OF SRI LANKA BANK SUPERVISION DEPARTMENT
15 May 2020 | BANKING ACT DIRECTIONS | No. 04 of 2020
LOAN TO VALUE RATIOS FOR CREDIT FACILITIES GRANTED IN RESPECT OF MOTOR VEHICLES
Issued under Sections 46(1) and 76(J)(1) of the Banking Act, No. 30 of 1988, as amended.
The Central Bank of Sri Lanka issues Directions as follows for implementation of loan to value ratios in respect of credit facilities granted by licensed commercial banks (LCBs) and licensed specialised banks (LSBs), hereinafter referred to as licensed banks, for the purpose of purchase or utilisation of motor vehicles.
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The following will replace Directions 1 (i) of the Banking Act Directions No. 04 of 2019 on Loan to Value Ratios for Credit Facilities Granted in respect of Motor Vehicles.
(i) Credit facilities granted by licensed banks for the purpose of purchase or utilisation of motor vehicles shall not exceed the following percentages of the market value of such vehicles.
(a) In respect of unregistered vehicles and registered vehicles which have been used in Sri Lanka for less than one year after the first registration;
Table 1 – Loan to Value Ratio
| Vehicle Category | Vehicle Class of Department of Motor Traffic | Electric Vehicles | Other |
|---|---|---|---|
| Commercial vehicles | C1, C, CE, D1, D, DE, G1, G, J | 90% | 90% |
| Motor Cars, SUVs and Vans | B (other than light trucks & single cabs) | 90% | 50% |
| Locally Assembled Motor Cars, SUVs and Vans | B (other than light trucks & single cabs) | 90% | 70% |
| Three wheelers | B1 | 90% | 25% |
| Light trucks | B | 90% | 90% |
| Any other vehicle | A1, A and single cabs categorized under B | 90% | 70% |
| Hybrid Motor Cars, Vans and SUVs | B (other than light trucks & single cabs) | 50% |
(b) 70 per cent in respect of registered vehicles which have been used in Sri Lanka for more than one year after the first registration.
CENTRAL BANK OF SRI LANKA BANK SUPERVISION DEPARTMENT
15 May 2020 | BANKING ACT DIRECTIONS | No. 04 of 2020
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Loan to Value Ratio for credit facilities granted for importation or purchase of motor vehicles under permits on concessionary terms shall be computed based on the proforma invoice value, instead of the market value of the motor vehicle.
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The Banking Act Directions No. 04 of 2019 dated 31.05.2019 on Loan to Value Ratios for Credit Facilities Granted in Respect of Motor Vehicles are withdrawn with effect from the date of this Directions.
(Signature)
Prof. W D Lakshman Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka