A booming financial sector triggers public frustration amid lopsided economic recovery
At a time when many Sri Lankan families are trimming grocery bills and putting off major purchases, the country’s banking sector is cashing in — and people are taking notice.
Banks are posting record profits, even as economic scars from the country’s worst financial crisis in decades continue to sting. The juxtaposition is creating unease on the ground, where citizens are asking how the institutions once blamed for helping spiral the economy are now the ones riding high.
A Financial Paradox Unfolds
Sri Lanka’s major banks aren’t just surviving — they’re thriving. In the first quarter of 2025, banking sector earnings jumped 52.9% compared to the same period last year.
That’s no small feat in a country still dealing with high food prices, public frustration, and a recovering but fragile economy.
The economy grew 4.8% in Q1 2025, slightly slower than 2024’s 5.1%, but still an improvement after years of instability. Much of the boost came from a resurgent services sector — and banks, embedded in that sector, were key contributors.
Meanwhile, agriculture shrank by 0.7%. Many rural families relying on crops are finding it harder to make ends meet. That stark contrast in sector performance is fueling concerns over a growing wealth gap.
“It’s hard to explain this to everyday people,” said a Colombo-based economist. “They see headlines about profits while they’re wondering how to pay for dhal and rice. It’s a disconnect.”
Where the Money’s Coming From
There’s no mystery about why banks are doing well — at least on paper.
Post-crisis, business activity picked up. That brought higher credit demand and increased banking transactions. At the same time, impairment charges — the costs banks set aside to cover bad loans — dropped as borrowers regained the ability to repay.
That means:
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Higher net interest income from new loans
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Lower write-offs from unpaid debts
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More activity across all services: deposits, remittances, trade finance
Banks, in short, are riding the wave of economic normalization, even if it’s a choppy ride for the rest of the country.
“This recovery is real for some,” one industry executive said. “But it’s patchy, and not everyone’s feeling the sunshine yet.”
Public Mood: Uneasy and Wary
Ask around in Colombo, Kandy, or rural towns in Anuradhapura, and the story repeats itself. People are confused — and some are angry.
Many still remember the 2022 foreign exchange crisis that led to empty petrol pumps, power cuts, and IMF interventions. Trust in financial institutions eroded during that period. So when banks report billions in earnings, it doesn’t exactly feel like good news to all.
“It’s like they fell into a hole with us and then climbed out using a ladder made of our money,” said Nadeesha, a 42-year-old teacher in Galle.
One cab driver in Dehiwala was more blunt. “My loan interest went up last year, and now they’re profiting? How is that fair?”
A Tale of Two Recoveries
Let’s lay it out in numbers. Here’s a quick look at how various sectors in Sri Lanka fared in Q1 2025:
| Sector | Q1 2025 Growth Rate | Notes |
|---|---|---|
| Overall Economy | 4.8% | Slight slowdown from 2024 |
| Industrial Sector | 6.3% | Led by construction and manufacturing |
| Services Sector | 5.7% | Banking and tourism helped push growth |
| Agriculture Sector | -0.7% | Drought and low prices hurt farmers |
| Banking Sector | +52.9% earnings | Higher interest income, fewer bad loans |
So yes, banks are flying. But farmers are flailing. And inflation is biting.
That unevenness is what’s driving public sentiment. It’s not that people don’t want banks to succeed — they just want a piece of the pie too.
Can It Last?
Here’s the twist: some economists are raising red flags.
A depreciating currency, slow wage growth, and stubborn debt burdens could catch up to the sector. And if households keep feeling squeezed, credit demand could taper off again.
“Banking sector profits are cyclical,” said the head of research at a Colombo investment firm. “Right now, they’re enjoying the rebound. But if inflation doesn’t ease and the rupee keeps weakening, margins will come under pressure.”
Another concern is whether the banking sector is doing enough to support national recovery. Small business lending, rural outreach, and inclusive financial access — these things matter too, but they’re harder to measure than a quarterly earnings jump.
Behind Closed Doors
Within bank boardrooms, there’s a mix of optimism and caution.
One executive with a top private bank said they’re expanding digital operations to reach new customers. Another said remittance flows from overseas workers had buoyed foreign currency reserves, giving banks breathing room.
Still, beneath the surface, some worry a backlash is brewing. “We don’t want to look like we’re celebrating while the country bleeds,” said one senior official, requesting anonymity.
Public relations teams are also reportedly advising restraint in how results are communicated. “Focus on resilience, not riches,” said one memo circulating internally.
Reality Check Ahead
Not everyone in the sector is popping champagne. Smaller banks, especially those with exposure to struggling rural clients or weaker capital buffers, aren’t sharing equally in the profit boom.
And with food inflation still high — over 11% in May — more people are relying on informal lending or credit cards just to get by.
Sri Lanka’s recovery isn’t a one-size-fits-all tale. It’s layered, uneven, and emotionally charged. That’s the backdrop against which banks are posting profits — and the reason why many ordinary Sri Lankans aren’t cheering them on just yet.
