Regulatory Alerts2017-02-17 | Finance Business Act Direction No. 3 of 2017Amendment to Directions on Loan to Value Ratios for Motor Vehicle Credit Facilities
The Monetary Board of the Central Bank of Sri Lanka issued Direction No. 03 of 2017 to amend the interpretations within Direction 5 of the Finance Business Act Directions No. 01 of 2017. The amendment establishes specific Loan to Value (LTV) limits for various vehicle categories, setting caps at 90% for commercial vehicles, 50% for motor cars and SUVs, 25% for three-wheelers, and 70% for other vehicles. It also defines vehicle valuation methods, clarifies terms for fleet and tourism companies, and permits a 70% LTV for applications received or approved on or before 16 January 2017.
MONETARY BOARD CENTRAL BANK OF SRI LANKA
17 February 2017 | FINANCE BUSINESS ACT DIRECTIONS | No. 03 of 2017
AMENDMENT TO DIRECTIONS ON THE LOAN TO VALUE RATIOS FOR CREDIT FACILITIES IN RESPECT OF MOTOR VEHICLES
The interpretations in Direction 5 of the Finance Business Act Directions No. 01 of 2017 are amended by replacing the following:
- 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. 5.2 The value of the vehicle shall be the market value. LFCs may use the following for the purpose of valuing vehicles: i) Brand new vehicles - value given by authorized agents ii) Reconditioned vehicles - valuation considered at customs or invoice value given by the dealer iii) Registered vehicles - value given by a professional valuer 5.3 LFCs should ensure that the valuation is obtained at the time of granting credit facilities and provides a true and fair value. 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 (Lorries and Heavy Vehicles) | C1, C, CE, DE, G1, G, J | 90% |
| Motor Cars, SUVs and Vans | B, D1, D | 50% |
| Three wheelers | B1 | 25% |
| Any other vehicle | A1, A | 70% |
5.5 Fleet of vehicles referred to in Direction 3.1 shall mean two or more vehicles.
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MONETARY BOARD CENTRAL BANK OF SRI LANKA
17 February 2017 | FINANCE BUSINESS ACT DIRECTIONS | No. 03 of 2017
5.6 Company engaged in tourism referred to in Direction 3.1 shall mean a company registered with the Sri Lanka Tourism Development Authority or any other authority to provide services to tourism.
5.7 A company engaged in transportation referred to in Direction 3.1 shall mean any business entity registered at any state authority for the purpose of business of transportation of goods or passengers.
5.8 An LTV of 70% may be approved for credit in respect of all vehicles where applications for credit have been received or credit facilities have been approved by a LFC on or before 16 January 2017.
(Signature)
Dr. Indrajit Coomaraswamy Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka
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