CBSL credit survey signals easing conditions but SME bank loan rejections up

SME bank loan rejections edged up in 4Q 2025 due to repayment constraints and weather impacts Banking NPLs decline for sixth consecutive quarter

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THE banking sector reported an improvement in lending appetite and loan demand heading into 2026, according to the Central

Bank of Sri Lanka (CBSL) Credit Supply Survey for the fourth quarter of 2025 and outlook for the first quarter of 2026, released yesterday, even as micro, small and medium enterprises (MSMEs) continue to raise concerns over access to finance and borrowing costs.

The detailed survey shows that during 4Q 2025, banks increased their willingness to lend to the retail, corporate and SME sectors, while appetite for lending to State-owned enterprises declined, continuing trends seen earlier in the year.

The CBSL attributed the improved lending stance to strong capital and liquidity positions, stable interest and exchange rates, political stability and broader macroeconomic stabilisation, alongside favourable inflation conditions and improved business sentiment.

"During 2026 10, the willingness to lend is expected to increase further across the retail, corporate, and SME sectors," the Central Bank said in the survey, citing anticipated growth in business activity, improved bank liquidity and a favourable economic outlook.