Sri Lanka has an extraordinary amount of money sitting in banks and finance companies. At the same time, Sri Lankans are borrowing enormous sums against their jewellery. The two numbers are not contradictory. They may instead reveal something much more important about where the country’s wealth actually sits.
At the end of 2025, deposits in Sri Lanka’s banking system amounted to approximately Rs 19.93 trillion. Savings deposits accounted for around Rs 5.24 trillion while time deposits, principally fixed deposits, amounted to approximately Rs 13.04 trillion. Add approximately Rs 1.27 trillion held by finance companies and the combined pool of deposits moves beyond Rs 21 trillion.
That is an enormous stock of financial savings for an economy that has spent much of the past four years discussing hardship, falling living standards and household financial distress. It immediately raises an obvious question. If Sri Lanka has more than Rs 21 trillion sitting in banks and finance companies, how poor are Sri Lankans really?
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The answer lies partly on the other side of the financial system. At the end of 2025, commercial banks had approximately Rs 898 billion outstanding in pawning advances, while finance companies had around another Rs 465 billion in lending secured against gold. On that basis alone, identifiable institutional lending against gold was already approximately Rs 1.36 trillion, without attempting to count every other form of pawning activity outside those categories.
Gold-backed lending has continued expanding rapidly. Finance-company lending secured against gold was growing by 69.2 percent year-on-year at the end of the first quarter of 2026, sufficiently quickly for the Central Bank to intervene by imposing a maximum loan-to-value ratio of 70 percent. The regulator was concerned not simply about borrowers but about the potential financial-system consequences of rapidly expanding collateral lending while gold prices themselves were volatile.
Put the deposit and pawning numbers beside each other and what initially appears contradictory begins making sense. The Sri Lankan placing Rs 20 million into fixed deposits and the Sri Lankan pawning jewellery to meet an urgent expense are both represented in national financial statistics. They are not necessarily the same Sri Lankan.
Aggregate numbers disguise distribution. A country can possess substantial private wealth while large numbers of its people have very little liquid financial security. One household may be searching for another half percentage point on a fixed deposit while another is calculating how much can be borrowed against a chain or sovereign. Both are participating in the same financial system from opposite ends.
This brings us to another intriguing question. Is there substantially more money available in Sri Lanka that could be attracted into deposits, particularly by finance companies prepared to offer higher interest rates than the major banks?
There almost certainly is, but movement into deposits should not automatically be confused with the creation of new savings. If Rs 10 million moves from a commercial bank fixed deposit to a finance company offering a better return, the country has not acquired another Rs 10 million. The same money has changed institutions. Similarly, moving money from a savings account into a fixed deposit changes its classification without increasing national wealth.
There are nevertheless pools of wealth outside conventional bank deposits. Sri Lankans hold Treasury securities, unit trusts, equities, insurance and pension assets, foreign currency, businesses, property, cash and gold. Higher deposit rates can persuade some of that money to migrate, particularly when investors become more interested in income than capital appreciation.
This is where finance companies become interesting. An additional percentage point or two on a substantial fixed deposit can produce meaningful additional income, and licensed finance companies compete aggressively for deposits. But the additional interest should never be examined separately from the institution paying it.
A finance company accepting a deposit must put that money to work at a sufficiently higher return to pay the depositor, meet its operating expenses, absorb defaults, satisfy regulatory requirements and still produce a profit. The question for the depositor is therefore not merely what interest rate is being offered, but how the institution is earning enough to pay it.
The recent expansion of finance-company lending provides part of the answer. Credit from the sector was growing by more than 50 percent year-on-year at the end of the first quarter, with vehicle finance and gold-backed lending particularly strong. One person’s fixed deposit may therefore become another person’s vehicle loan or another family’s borrowing against jewellery.
There is nothing improper about that. It is financial intermediation, which is precisely what banks and finance companies exist to do. What matters is the quality of the lending and whether depositors understand that a higher return does not remove risk.
Licensed finance companies are regulated and participate in Sri Lanka’s deposit insurance system, but the protection is limited. The maximum compensation is presently Rs 1.1 million per depositor. Someone considering placing Rs 10 million or Rs 20 million with an institution because it offers a higher fixed-deposit rate should therefore be examining considerably more than the advertisement.
Capital strength, liquidity, profitability, bad loans, ownership, management and the composition of the loan book matter. An additional percentage point becomes considerably less exciting if the principal itself is exposed to unnecessary risk. Sri Lanka’s previous finance-company failures provide sufficient reason for depositors to understand that distinction.
Gold adds another dimension because jewellery performs two completely different financial functions. For a financially comfortable household it can be accumulated wealth, held for years and passed between generations. For a household short of cash it becomes an emergency credit facility that can be converted into liquidity without actually selling the asset.
That may make the growth in gold-backed lending one of the more revealing indicators of household finances in Sri Lanka. A pawning loan is not automatically evidence of poverty because businesses and investors also borrow against gold. But growth approaching 70 percent in one part of the regulated financial system deserves attention, particularly when it occurs alongside a vast stock of deposits elsewhere.
Sri Lanka therefore appears to have plenty of money. What it may not have is an even distribution of money.
The more interesting question is consequently not simply whether another trillion rupees can be attracted into fixed deposits. It is where that trillion would come from, where the financial institutions would subsequently lend it and whether the country’s savings are ultimately financing productive investment or another expansion of consumption, vehicles and borrowing against family gold.
More than Rs 21 trillion in deposits tells us something about Sri Lanka’s wealth. More than Rs 1 trillion borrowed against gold may tell us rather more about its people.
