Sri Lanka’s banking sector asset quality to come under pressure in 4Q
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Sri Lanka’s banking sector is expected to face a higher number of Non-Performing Loans (NPLs) in the fourth quarter compared to the third quarter.
According to the Central Bank (CB), NPLs in the banking sector was increased at a slower pace in the third quarter compared to the second quarter, in particular in retail, corporate, and SME categories.
The increase in NPL in the retail sector was due to the expiration of moratorium facilities provided on personal loans and leasing rentals.
The increase in NPL in corporate and SME categories was due to defaults of clients who had not applied for moratorium facilities under the impression that it would be implemented from the banks’ end.
The gross NPLs in the banking sector remained steady at 5.2 percent in October as high volumes of credit were under a Covid-19 moratorium.
