Pawning loans grow only by Rs.30bn in Jan-Sept. contrary to claims

• Accounts for just 15% of total private sector credit extended by commercial banks

Pawning or gold-backed loans offered by commercial banks have increased by only Rs.30 billion from Rs.211 billion to Rs.241 billion through the January-September period contrary to reports that this loan stock has soared over Rs.600 billion.

According to Central Bank data, this is just 15 percent of the total private sector credit extended by licensed commercial banks during the nine months. 

Sri Lanka’s private sector credit got off to a robust start in August with a net growth in total outstanding private sector credit of Rs.78.3 billion, followed by even higher expansion of Rs.87.4 billion in September, taking the cumulative increase to Rs.199.1 billion. 

According to data, the total outstanding gold-backed loan stock as of end-September was a fraction of the total outstanding private sector credit of Rs.5, 996.1 billion. That is, the total pawning loan stock was just 4 percent of the total outstanding private sector credit of the licensed commercial banking sector in the country. 

Meanwhile, contrary to forecasts made by multiple parties to the effect that the banking sector asset quality to plunge into disastrous levels once the moratorium ends, the banks reported improvement in their asset quality during the September quarter. 

Sri Lanka’s largest bank, Bank of Ceylon reported 4.98 percent gross non-performing loan ratio in September, improving from 5.35 percent in June and little changed from 4.79 percent at the beginning of the year. 

Last week, an Opposition legislator said the country’s pawning loan stock had soared to Rs.643 billion, which would be an indication of the economic challenges faced by the people due to the pandemic.