As 2025 draws to a close, the Central Bank of Sri Lanka has released the Financial Soundness Indicators for the third quarter (July–September 2025). These figures, combined with the strong fiscal performance recorded in the first nine months of the year, offer reassuring news for ordinary Sri Lankans who are still recovering from the 2022 economic crisis and now facing the aftermath of Cyclone Ditwah.
For most people, banking statistics may seem distant and technical. Yet the health of banks and finance companies directly affects everyday life: the ability to get a housing loan, keep savings safe, run a small business, or simply withdraw cash when needed. When banks are strong, families and communities feel more secure. When they are weak, everyone suffers. The latest data show that Sri Lanka’s financial sector is steadily becoming stronger, a quiet but important victory for the public.
A Sector Recovering with the People
Before Cyclone Ditwah struck in late November, the banking sector had grown significantly. Total assets reached nearly Rs. 20 trillion, a 15.6% increase compared to the same period in 2024. This growth did not come from risky adventures but from sensible lending to businesses and individuals. Deposits the savings of ordinary citizens also rose steadily, showing that people are gradually regaining trust in placing their money in banks.
Equity, or the banks’ own cushion of safety, grew by more than 20%. This means banks have more of their own money to fall back on if loans go bad. For the public, stronger equity translates into lower risk of bank failures and greater protection for depositors.
Finance companies, which serve many lower-income and rural customers through vehicle loans, gold loans, and small business credit, saw even faster asset growth of around 35–39%. Their profits also rose sharply. This is good news for the millions who rely on these institutions rather than large commercial banks.
Fewer Bad Loans, More Breathing Room for Borrowers
One of the biggest worries after the 2022 crisis was the high level of non-performing loans money borrowed but not repaid on time. High bad loans force banks to be cautious, making it harder for honest borrowers to get new credit.
The Q3 report shows clear improvement. The share of seriously overdue loans continued to fall across both banks and finance companies. Banks now set aside more money to cover possible losses, creating stronger safety nets. This gradual cleaning-up of balance sheets means banks can start lending more confidently again without fearing sudden collapses.
For ordinary people, this translates into easier access to credit in the coming years whether for a child’s education, a home repair, or starting a small shop.
Profits Returning, But Not at the Public’s Expense
Bank profits for the first nine months of 2025 jumped by over 50% compared to 2024. At first glance, some may feel uneasy about banks earning more while many households still struggle. However, these profits are largely coming from wider interest margins, the difference between what banks pay on deposits and charge on loans in a higher interest-rate environment, combined with better cost control.
Importantly, these earnings are helping banks rebuild their own capital without needing government bailouts or higher fees on customers. Healthy profits allow banks to absorb future shocks, such as loan defaults caused by the cyclone, without immediately passing the burden onto depositors or borrowers.
Liquidity and Safety: Cash When People Need It
Liquidity measures show that banks hold far more cash and easily sellable assets than required by regulators. The Liquidity Coverage Ratio stands comfortably above 240–250%, meaning banks can handle large withdrawals even in stressful times.
This is especially reassuring after memories of 2022 queues outside banks and fuel stations. Strong liquidity reduces the chance of sudden restrictions on withdrawals and helps ensure that salary credits, pension payments, and remittances reach accounts smoothly.
Fiscal Strength Before the Storm
Separate data released for January–November 2025 paint an equally positive picture of government finances. The budget deficit shrank dramatically by 73% compared to the previous year, while the primary surplus revenue exceeding non-interest expenditure surged by 109% to nearly Rs. 1.94 trillion.
This performance was driven by much better tax collection (up 37%) and controlled spending. For citizens, it meant the government entered the cyclone crisis with substantial cash buffers of Rs. 1–2 trillion. These reserves are now being used to fund relief and reconstruction without immediately resorting to heavy new borrowing or printing money actions that would fuel inflation and hurt the poor the most.
What This Means for Ordinary Sri Lankans Today
Taken together, the banking and fiscal numbers tell a story of quiet consolidation. The financial system is not yet perfect, but it is markedly stronger than two years ago. Deposits are safer, bad loans are declining, capital buffers are growing, and the government has room to respond to disasters.
This matters deeply for everyday life:
- Families planning to buy or build a home can look forward to more reasonable loan availability in 2026–2027.
- Small entrepreneurs and farmers affected by the cyclone may find banks and finance companies more willing to restructure existing loans or offer fresh working capital.
- Pensioners and salaried workers can feel greater confidence that their savings and monthly credits are secure.
- Inflation pressures may ease as the government avoids excessive borrowing to cover cyclone costs.
Challenges Ahead: Cyclone Ditwah’s Shadow
The data only cover the period up to September–November 2025, before Cyclone Ditwah caused widespread destruction. The storm damaged homes, crops, small businesses, and infrastructure across the island. Many borrowers in affected districts will struggle to repay loans in the coming months.
The good news is that the sector’s improved health provides a buffer. Banks have the capital and provisions to handle a temporary rise in overdue loans without panic. The government’s pre-cyclone fiscal surplus and IMF support offer resources for targeted relief programmes.
Public policy should now focus on ensuring that this resilience translates into real help on the ground:
- Grace periods and restructuring for cyclone-affected borrowers.
- Priority lending for rebuilding homes and restarting small businesses.
- Continued close supervision by the Central Bank to prevent any weakening of standards.
A Foundation to Build On
Sri Lanka’s financial sector and public finances have shown remarkable recovery in 2025. While Cyclone Ditwah has set back progress, the strengthened foundations mean the country is far better equipped to rebuild than it was in 2022.
For ordinary citizens, these dry statistics carry a simple message: the worst of the financial instability is behind us. Banks are safer, government finances are more responsible, and there is realistic hope that credit will flow again to support families and communities.
Continued transparency, prudent oversight, and people-centred policies will ensure that this resilience benefits everyone not just balance sheets, but the daily lives of Sri Lankans working to secure a better future.
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