Bank lending backed by gold recorded a sharp increase during the first half of 2026, with pawning advances rising by Rs. 211.9 billion in just six months, according to Central Bank of Sri Lanka (CBSL) data.
Pawning advances grew by 23.6% between the end of December 2025 and the end of June 2026, bringing the total outstanding value of such loans to Rs. 1.11 trillion.
The increase was the second highest recorded among individual lending sub-sectors during the period and was only marginally below the growth in credit to financial and business services.
Licensed Commercial Banks increased lending to financial and business services by Rs. 212.7 billion, or 27.1%, taking outstanding credit to the sector to Rs. 996.8 billion. The increase exceeded that of pawning advances by only Rs. 0.8 billion.
CBSL data shows that banks extended a total of Rs. 1.14 trillion in new private-sector credit during the first six months of the year. Pawning alone represented 18.6% of this increase.
The rise in gold-backed borrowing also made up a significant portion of the expansion in personal credit. Of the Rs. 443.5 billion increase in personal loans during the period, nearly half came from pawning.
In comparison, new credit to agriculture and fishing amounted to Rs. 86.6 billion, meaning the increase in pawning advances was more than double the new lending recorded by those sectors.
Pawning has also increased its presence in banks’ overall loan portfolios. Its share of total bank lending climbed from 8.9% at the end of December 2025 to 9.9% by the end of June. The value of outstanding pawning advances had already exceeded Rs. 1 trillion by March.
At Rs. 1.11 trillion, pawning is now the third-largest lending sub-sector, behind construction, including housing, at Rs. 1.91 trillion and wholesale and retail trade at Rs. 1.13 trillion.
Pawning loans are secured against gold, limiting credit risk for banks compared with unsecured borrowing. However, the borrowing capacity available to customers is closely linked to changes in the value of gold.
Meanwhile, financial and business services accounted for 18.7% of the Rs. 1.14 trillion in new credit during the first half, while other personal loans accounted for Rs. 136.9 billion, or 12%.
Construction, including housing, attracted another Rs. 85.4 billion, equivalent to 7.5% of new credit. Consumer durables accounted for Rs. 53.5 billion, while chemical, petroleum and pharmaceutical products received Rs. 42.8 billion and tourism Rs. 40.1 billion.
Combined, pawning and financial and business services absorbed Rs. 424.6 billion, or around 37%, of the new credit extended during the six-month period.
This exceeded the Rs. 358 billion increase recorded across the broader services sector and the combined Rs. 335.5 billion increase in lending to industry and agriculture.
Overall, the figures indicate that households and financial businesses were major drivers of the expansion in private-sector credit during the first half of 2026.
Personal lending together with credit to financial and business services accounted for 58% of new lending, compared with 39% directed towards non-financial businesses in agriculture, industry and services. (Newswire)
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