Central Bank Highlights Stronger Financial Sector Performance in 2025
Domestic macrofinancial conditions strengthened further in 2025, supporting continued credit expansion, although external vulnerabilities persisted. Credit growth accelerated significantly, with total lending by banks and finance companies rising by the end of 2025.
The financial sector’s exposure shifted further toward the private sector, driven by robust private credit growth, while exposure to the public sector declined in line with ongoing fiscal consolidation. Despite this shift, government-related exposure remains substantial. Financial intermediation improved, reflected in a continued increase in the banking sector’s credit-to-deposits ratio. However, the widening positive credit-to-GDP gap highlights the need for continued vigilance against potential systemic risks.
External uncertainties—including geopolitical tensions in the Middle East, commodity price volatility, and adverse weather conditions—pose downside risks to credit quality. In this context, sustained fiscal consolidation and stronger external buffers remain essential to safeguarding macrofinancial stability.
Banking Sector Performance
Credit growth in the banking sector accelerated sharply by end-2025, supported by accommodative monetary conditions, improved macroeconomic fundamentals, and strong loan demand. Gross loans and receivables expanded by 21.4% year-on-year, compared to 4.1% in 2024.
Growth was broad-based, spanning financial services, trade, consumption, overseas lending, construction, and manufacturing. A key development was a sharp 148% increase in credit to the financial services sector, reflecting rising funding needs within finance companies amid strong demand.
Asset quality improved further, with the stage 3 loan ratio declining to 9.7% from 12.3% a year earlier, marking the first return to single-digit levels since Q2 2022.
Liquidity and capital buffers moderated due to strong credit expansion but remained well above regulatory thresholds. Liquidity Coverage Ratios stood at 283.3% (rupee) and 249.7% (all currency), both significantly above the 100% requirement. The banking sector recorded a return on equity of 16.6%, while the Capital Adequacy Ratio eased to 17.9% from 20.3%, reflecting rapid loan growth.
Finance Companies Sector Performance
The finance companies sector maintained strong lending momentum in 2025, alongside stable liquidity, profitability, and capital positions.
Gross loans and advances grew by 51.9% year-on-year, up from 21.2% in 2024, driven mainly by vehicle financing (52.7%) and gold-backed lending (63.8%).
Asset quality improved significantly, with the gross stage 3 loan ratio falling to 6.1% from 11.5% the previous year, supported by stronger recoveries and expanded lending activity.
Liquidity remained above regulatory requirements, although surplus liquid assets declined to Rs. 74.3 billion from Rs. 105.1 billion due to increased lending. Profitability strengthened, with profit after tax rising 45% year-on-year to Rs. 61.5 billion in the first nine months of the 2025/26 financial year.
The sector’s Capital Adequacy Ratio moderated to 18.7% from 21.3%, reflecting rapid credit expansion, but remained comfortably above minimum regulatory levels.
ComBank Appointed Patron of Two UNGC Network Sri Lanka Working Groups
The Commercial Bank of Ceylon has strengthened its leadership in sustainability by becoming a Patron of the United Nations Global Compact Network Sri Lanka’s ‘Diversity & Inclusion’ and ‘Water & Ocean Stewardship’ Working Groups.
This commitment was formalised through the signing of a two-year Memorandum of Understanding (MoU) between Commercial Bank and the UN Global Compact Network Sri Lanka. The agreement establishes the Bank’s patronage of the two Working Groups and its active role in guiding initiatives that promote sustainable water management and inclusive business practices.
Under this partnership, Commercial Bank will provide leadership and advocacy to advance the objectives of both Working Groups. The Bank will work closely with the Network to organise events, facilitate dialogue and partnerships, and encourage broader corporate participation in strengthening environmental, social and governance (ESG) practices. The collaboration will also support efforts to accelerate progress towards the Ten Principles of the UN Global Compact and the UN Sustainable Development Goals (SDGs), with a focus on sustainable water management, ocean stewardship, gender equality, and inclusive economic participation.
This latest engagement builds on Commercial Bank’s long-standing association with the UN Global Compact Network Sri Lanka. The Bank became a Participant Organisation in 2002, just two years after the Global Compact was launched worldwide and nearly a decade before the establishment of the Sri Lanka Country Network in 2011. Notably, Commercial Bank was the first bank in Sri Lanka to join the initiative. Since then, it has remained actively engaged in various programmes, including Global Accelerators and Country Working Groups, demonstrating its continued commitment to responsible business practices and sustainable development.
Commenting on the initiative, Commercial Bank Managing Director and Chief Executive Officer Mr. Sanath Manatunge said the Bank’s long association with the UN Global Compact reflects its belief that responsible business plays a vital role in building a sustainable future. He noted that by becoming a Patron of the two Working Groups, the Bank is expanding its engagement beyond internal sustainability implementation to actively supporting and guiding other organisations on their own sustainability journeys. He added that this partnership will contribute to progress in areas critical to Sri Lanka’s environmental resilience, inclusive growth, and long-term economic stability.
As a Patron, Commercial Bank will continue to work closely with Network Sri Lanka to promote improved water management practices and inclusive workplace policies across the corporate sector. The Water & Ocean Stewardship Working Group focuses on advancing sustainable water management practices that balance economic, social, and environmental needs while protecting long-term water security. Meanwhile, the Diversity & Inclusion Working Group encourages organisations to build equitable workplaces that value individuals regardless of gender, background, or identity, and to adopt policies that promote gender equality, eliminate discrimination, and ensure equal opportunity across all levels.
The Bank’s engagement will also support broader initiatives aimed at strengthening gender balance and economic participation, including ongoing efforts to empower women entrepreneurs and women-led businesses, while promoting fair and equitable access to financial services and opportunities for all.
Central Bank of Sri Lanka outlines financial sector performance for 2025
