Partial relaxation of vehicle import ban to boost prospects for diversified financials

 The move to partially relax the vehicle import ban, announced by the government recently, is expected to boost the prospects for diversified financials, given that 57.3 percent of the loan book in the sector is exposed to the leasing business, First Capital Research said. 
Further, taming down on interest rates together with the pickup in economic activity in the country is also expected to aid leasing volumes once the government partially relaxes the prevailing import ban, the entity added. 
However, the steep depreciation of the rupee and recently implemented taxes are expected to cause headwinds to the expected growth in volumes. 
According to First Capital Research, the lifting of the ban on small vehicles under 1,300CC will trigger new registrations between 10,000 and 15,000 in the next two years, as pent-up demand is expected to drive volumes. 

The import ban on vehicles has been in place since 2020, a decision rolled out by the government to prevent the island nation from further losing foreign exchange. 
The move to relax small vehicle imports comes in the wake of limited revenue collection by Sri Lanka Customs, approximately falling short by Rs.300 billion-Rs.450 billion, on the backdrop of stringent revenue targets set by the International Monetary Fund. 
Before the ban on vehicle imports, Sri Lanka had new vehicle registrations of over 350,000 annually. The majority was dominated by motorcycles, with over 280,000 registrations, followed by cars, with over 35,000 new registrations.  New registrations of small car imports of less than 1,000CC amounted to 26,962 in 2019 and 64,195 in 2018.