Waruni Jayathunga
Sri Lanka’s banking sector non-performing loans (NPLs) reduced to 12.3% at the end of 2024, indicating a gradual easing of credit risk in the sector, the Central Bank of Sri Lanka (CBSL) said.
According to the Monetary Policy Report, the overall default risk of the banking sector, as reflected through the stage 3 loans ratio, reduced to 12.3% at end 2024 compared to 12.8% recorded at end 2023.
Yet banking sector NPLs remained above the stage 3 loans ratio of the finance companies (FCs) sector which amounted to 11.3% at end 2024.
The Central Bank said that the NPL ratio has also been contracting since June 2024 on a y-o-y basis, indicating a gradual easing of credit risk in the banking sector.
Moreover, the report said that the resilience of the financial sector gradually improved during 2024 amidst easing macroeconomic conditions.
“The total assets of the banking sector grew during the period under review mainly due to increased investments and loans and receivables,” Central Bank said.
Accordingly, assets of the banking sector recorded a y-o-y growth of 8.7% at end 2024 and stood at Rs. 22.2 trillion.
Gross loans and receivables of the banking sector grew by 4.1%, y-o-y, at end 2024, amidst the easing monetary policy stance.
Also, the profit-after-tax (PAT) of the banking sector significantly increased during 2024 compared to the previous year, reporting PAT of Rs. 309.8 billion in 2024 compared to Rs. 188.4 billion in 2023.
Further, The FCs sector recorded a y-o-y expansion of 20.9% in its loans and advances portfolio at end December 2024, mainly due to the increase in finance leases, pawning/gold loans and personal loans.
