News & market updates

The Reserve Bank of India amended rules to allow Indian banks and their overseas branches to lend in Indian rupees to banks and individuals in Sri Lanka, Bhutan and Nepal, a move Delhi says will ease credit access, reduce exchange-rate risk and boost regional trade.

Sri Lanka central bank net foreign assets rose to $1,710m in August 2025 from $1,468m after some inflationary swaps were unwound. Inflationary swaps with banks fell to $3,680m from $3,845m; unwinding withdraws liquidity, can constrain domestic credit and hinder reserve accumulation, raising forex/default risks.

Treasury Bond auctions on 10 Oct were undersubscribed, raising Rs.162.11 billion (89.56% of the Rs.181 billion offered). Yields stayed largely steady (15.10.29 at 9.68%, 01.07.30 at 9.80%), overnight money rates ~7.87–7.88% and USD/LKR stable around 302.60.

The Reserve Bank of India has allowed Indian banks and their Sri Lanka branches to lend to Sri Lankan customers denominated in Indian rupees, widening credit access and reducing exchange-rate risk for Sri Lankan businesses.

Sri Lanka's rupee was little changed at 302.59/62 to the US dollar while government bond yields were broadly steady, with maturities from 2026–2032 trading around 8.30%–10.62%. The state sold Rs162.1bn of 2030, 2032 and 2035 bonds out of Rs181bn offered.

Sri Lanka's rupee strengthened slightly to 302.57/63 against the US dollar from 302.60/68, while bond yields were broadly steady as a 181,000 million rupee Treasury bond issue was ongoing; the ASPI rose 0.22% to 22,368.22.

CBSL reports migrant workers sent US$695.7m in remittances in September, US$140.1m higher than a year earlier, with Jan–Sep remittances at US$5,811.7m (up US$967.9m). Tourism receipts were US$182.9m in September (CBSL also cites US$182.9m for Jan–Sep).

Workers' remittances rose to $695.7m in September — the third-highest monthly inflow in 2025 and a 25.2% YoY increase; year-to-date remittances for Jan–Sep were $5.8bn, up 20% YoY and marking six consecutive months of record inflows.

Secondary bond-market sentiment recovered ahead of the Rs.181.00 billion Treasury Bond auction on 13 Oct, with yields easing on 2026–2029 tenors and renewed buying at the long end. The auction offers Rs.95bn (1-Jul-2030, 9.75%), Rs.45bn (1-Nov-2033, 9.00%) and Rs.41bn (1-Jul-2037, 10.75%); prior auctions were undersubscribed.

Sri Lanka's banks cut foreign borrowings and boosted FX deposits and investments, lifting net foreign‑currency assets 42.5% y/y to USD 1.5bn at end‑Q2 2025. D‑SIBs (84.8% of these investments) and banks including Sampath Bank and HNB financed foreign governments and firms via sovereign securities and syndicated loans.

Government deposited Rs1.1 trillion in state banks by end-2Q2025, with 80.7% in term deposits maturing within one year, the central bank said. The short-term maturity profile raises liquidity risk and could put pressure on forex reserves and interest rates if large withdrawals occur.

Private credit in Sri Lanka hit a record Rs226.8 billion in August 2025, up from Rs201.5 billion in July and taking the year-to-date total to Rs1,128 billion. Year-to-date private-sector credit rose 20.5% y/y to Rs9,284 billion while net credit to government from commercial banks fell in August.

Sri Lanka's official worker remittances rose 25.2% to $695.7m in September 2025, bringing nine-month inflows to $5.81bn, up 20% year-on-year. The rise follows increased outward migration and policy moves that ended the parallel exchange rate, boosting formal transfers.

Sri Lanka's rupee strengthened to 302.60/68 per USD on Friday (from 302.75/83), while government bond yields were slightly lower — the 15.03.2028 bond closed at 9.10/20% and the 15.12.2032 bond at 10.50/60%.

Sri Lanka's consumption loans, the largest banking credit segment at 2.3 trillion rupees, rose 11% year-on-year to June 2025, driven by a 140.5% surge in leasing and hire-purchase (vehicle) loans after import controls were relaxed. Personal loans grew 25.3%, pawning and credit-card portfolios expanded, and consumption-loan NPLs fell to 4.0% from 5.0%.

Secondary Treasury bond yields held broadly steady, with selected maturities trading around 9.14%-10.50% and total secondary market volume at Rs.14.28 billion on 8 Oct. Net liquidity surplus was Rs.156.75 billion and USD/LKR closed weaker at Rs.302.75/302.83.

IMF says Sri Lanka's debt restructuring is nearly complete with about $500m remaining and that debt sustainability requires continued fiscal discipline and reforms. It set a 2.3% of GDP primary surplus target for the 2026 Budget, noted vehicle-import tax receipts may be temporary, and said CBSL is on track to meet reserve targets.

Sri Lanka's rupee opened at 302.70/80 to the US dollar, slightly stronger than the prior day, while government bond yields were broadly steady with quoted maturities around 9.10%–10.65%; the ASPI was up 0.23%.

The IMF requires Sri Lanka's 2026 budget parameters to align with its EFF programme as a prior action before approving the Fifth Review and disbursing about US$347 million (the sixth tranche); the IMF seeks a primary fiscal surplus target of 2.3% of GDP.

Sri Lanka's rupee weakened to 302.75/83 per US dollar on Thursday from 302.65/69, while government bond yields were broadly steady (e.g. 15.12.2026 at 8.35/45%; 15.09.2027 at 8.79/88%).

Central Bank released the Financial Stability Review 2025, reporting improved financial-sector resilience in H1 2025 with rising private credit, lower interest rates, stronger bank profitability and capital, and subdued financial stress. The report also notes rupee depreciation, a strong stock market and increased demand for Treasury bonds.

IMF staff and Sri Lankan authorities reached a staff-level agreement on the Fifth Review of the Extended Fund Facility, which if approved would give Sri Lanka access to SDR 254 million (about US$347m), raising total disbursed to SDR 1,524 million (~US$2.04bn). Approval is contingent on parliamentary passage of the 2026 Appropriation Bill and completion of a financing-assurances review; the IMF also noted 4.8% y/y growth in 2025H1, Sep inflation of 1.5% y/y and reserves of US$6.1bn while urging f

A 22-carat gold sovereign in Colombo’s Pettah market rose to over Rs. 303,000 as global spot gold topped $4,000/oz for the first time; 24-carat sovereign also rose to Rs. 328,000, reflecting local currency pressure and record international bullion prices.

IMF staff reached a staff-level agreement on the fifth review of Sri Lanka’s EFF, which upon Executive Board approval would unlock about US$347 million in financing. The IMF noted progress on inflation, reserves, growth, revenue, and urged continued fiscal, energy pricing, SOE and banking reforms.

Sri Lanka rupee opened weaker at 302.70/75 per USD and government bond yields edged up (e.g. 15.12.2032 quoted 10.50/68%); the ASPI fell 0.21% to 22,144.

Sri Lanka's renewable power share fell to 66% in July from 73% in June as total generation rose to 1,583 GWh and fuel oil use jumped to 103 GWh. The Ceylon Electricity Board has sought a tariff increase for the rest of 2025 and is tendering for batteries, offering a 45.80 tariff for battery-stored night-peak supply.

Weekly T‑Bill auction saw weighted average rates largely steady (182-day 7.89%, 364-day 8.02%; 91-day down 1bp) but was undersubscribed, raising Rs.19.13bn (57.1% of the Rs.33.50bn target). Secondary bond trading was subdued and USD/LKR dipped to ~Rs.302.65/302.69.

Sri Lanka rupee closed at 302.65/69 to the US dollar, slightly weaker than 302.52/59 the previous day. Bond yields were broadly steady with key maturities quoted: 15.12.2026 at 8.35/45%, 15.09.2027 at 8.85/90%, 15.02.2028 at 9.05/10%, 15.12.2029 at 9.70/74%, and 15.12.2032 at 10.50/55%.

Sri Lanka's foreign reserves were US$6,243 million in September 2025, up US$77 million from August but effectively stagnant for 11 months. The central bank has cut rates and paused inflationary open-market operations, and the current IMF program does not require selling domestic central-bank assets, limiting sustainable reserve accumulation.

Sri Lanka's rupee opened at 302.55/60 to the US dollar, slightly weaker than the previous day, while bond yields were broadly steady and a 33,500 million rupee Treasury bill auction was underway. The ASPI was down 0.14% at 22,133.