Sri Lanka, June 7 -- The domestic financial system preserved its stability through the first quarter of 2026 despite global and domestic headwinds stemming from escalating Middle East tensions and geopolitical fluidity, according to the Central Bank.

In its Finance Sector Performance in the First Quarter of 2026, the CBSL noted that broadly supportive macrofinancial conditions prevailed during the quarter, characterised by an acceleration in credit growth.

Total financing extended by Licensed Banks and Finance Companies expanded, led primarily by robust demand from the private sector, while credit allocations to the Government and public corporations experienced a minor moderation.

The sovereign-bank nexus persisted, reflecting entrenc...