Regulatory Alerts2017-02-17 | Finance Leasing Act Directions No. 2 of 2017Amendment to Loan-to-Value Ratio Directions for Motor Vehicle Credit Facilities
The Central Bank of Sri Lanka amended its Finance Leasing Act Directions to establish standardized loan-to-value (LTV) ratios for motor vehicle credit facilities. The directive mandates that lenders value vehicles at market rates and applies specific LTV caps of 90 percent for commercial vehicles, 50 percent for cars and vans, 25 percent for three-wheelers, and 70 percent for other vehicles. It also clarifies definitions for vehicle fleets and tourism or transportation entities while permitting a temporary 70 percent LTV for applications processed on or before 16 January 2017.
# CENTRAL BANK OF SRI LANKA
## FINANCE LEASING ACT DIRECTIONS
**17 February 2017**
**No. 02 of 2017**
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### 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 Leasing Act Directions No. 01 of 2017 are amended by replacing the following:
#### 5. 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. SLCs 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** SLCs 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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**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 SLC on or before 16 January 2017.
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**U. P. Alawattage**
Director, Department of Supervision of Non-Bank Financial Institutions, Central Bank of Sri Lanka
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