Government to Merge State Housing Banks with BOC, PB

Sri Lanka’s government is merging HDFC and SMIB with Bank of Ceylon (BOC) and People’s Bank (PB) in a landmark housing finance overhaul. Approved by Cabinet on November 11, 2025, the move responds to Central Bank warnings about both lenders’ unsustainable business models and poor profitability.

HDFC will become a BOC subsidiary, while SMIB will join PB. Both banks have heavily relied on EPF-backed loans, limiting their loan diversity. Credit rating agency Fitch has placed the two banks on Rating Watch Positive, noting the mergers’ minimal impact on acquiring banks’ assets but highlighting capital pressures.

The consolidation aims to safeguard depositors and ensure housing credit continuity. However, analysts warn that low-income borrowers may be deprioritised under larger banks. Central Bank Governor Dr. Nandalal Weerasinghe stressed that strengthening financial sustainability is crucial. For thousands of housing finance recipients, the restructuring

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