MONETABRIEF – Sri Lanka's gold-backed and personal loans have surged in in the second quarter of 2026, driving up consumption loans by 29 percent over the previous year, against an 11 percent growth in 2025, a central bank report said.
Gold-backed loans, typically called pawning in Sri Lanka grew by 49.2 percent and personal loans 21.3 percent.
Gold prices soared over the past year, allowing bigger collateral for customers to borrow against.
Banks to do not classify whether gold-backed loans are for personal or business purposes.
"What we understand is gold loans and pawning is used for agriculture for three to six months when they need short term money," , Central Bank Governor Nandalal Weerasinghe said.
"That is the easiest instrument for someone to walk into a bank and take a short term working capital. That can be repaid when they get the harvest.
"That is the cycle we have seen. That is the most productive use of gold loans, especially outside Colombo."
The surge in pawning facilities which was supported by rising gold prices may expose banks to market risk in the event of significant downward adjustments in global gold prices and possible collateral risks arising from non-repayment, the central bank report said.
The Central Bank introduced a maximum loan-to-value (LTV) ratio of 70 percent on credit facilities secured by gold collateral, from May 2026.
"This requirement provides a collateral buffer against fluctuations in gold prices and reinforces prudent lending practices," the central bank said.
Non-performing loans (Stage 3) was now below 9 percent. NPLs in gold backed loans 0.2 percent.
Vehicle loans also grew last year. (Colombo/Oct13/2026)