The Central Bank of Sri Lanka (CBSL) has introduced maximum caps on loan-to-value (LTV) applicable for credit facilities secured by gold collateral.
The CBSL stated that the measure was taken under its macro prudential mandate to enhance the financial system stability and mitigate systematic risks, by reinforcing prudential credit standards in financial institutions regulated and supervised by the CBSL.
In arriving at this decision, the Central Bank had also taken into consideration the significant recent growth in gold-backed loan facilities and the potential impact such trends could have on the financial system if they continue.
Accordingly, with effect from today (25), all licensed commercial banks, licensed specialised banks, and licensed finance companies are required to limit loans granted against gold collateral to a maximum of 70% of the value of the gold collateral.
