In a year defined by tight liquidity, cautious borrowers and heightened regulatory scrutiny, People’s Bank delivered its strongest performance in 65 years. Profits surged by nearly 60% in 2025, liquidity hit record highs in both rupees and dollars, and capital buffers strengthened. This reflects not a cyclical bounce, but a structural shift in how the bank lends, manages risk and executes its mandate.
For Clive Fonseka, Chief Executive at People’s Bank, the results are less about a single good year and more about a deliberate re-engineering of how the bank allocates capital, prices risk and serves customers.
From state balance sheets to the private economy
Three years ago, close to 60% of People’s Bank lending was directed to government and state-owned enterprises (SOEs). By the end of 2025, that share had fallen to around 20%. The pivot did not come at the cost of growth. Total lending expanded 17% last year, driven by roughly 30% growth in private-sector credit.
This shift required more than a strategic decision; it demanded operational change. Branches that once focused mainly on deposit mobilisation had to develop origination capability, particularly for SMEs and retail borrowers. Training, internal targets and decentralised decision-making helped unlock credit growth beyond the Western Province, extending deeper into suburban and rural markets.
Balancing risk, returns and inclusion
With liquidity in surplus, the challenge was deploying capital without compromising asset quality. The bank diversified lending across SMEs, larger corporates and households, while retail credit expanded through personal loans and pawning.
Stricter underwriting and execution followed. Historically, around 5.5% of People’s Bank lending turned non-performing. Over the past five years, that ratio has fallen to about 2.5%, and to roughly 1.5% over the past three years, reflecting tighter controls and clearer accountability across credit and risk teams.
Profitability, Fonseka stresses, is not the bank’s sole objective. Around 30% of People’s Bank’s 750 branches operate in areas where no private bank or finance company exists. Seven in ten Sri Lankans hold an account with the bank, and one in five credit facilities in the country is provided by it. That reach makes the balance sheet a mirror of domestic economic conditions and anchors the bank’s role in financial inclusion.
Even as exposure to government and SOEs declined, the bank continued to support SMEs and entrepreneurs through concessionary schemes and subsidised working-capital facilities backed by the state, aligning commercial performance with public purpose.
Tested by shocks, supported by systems
External disruptions underscored the value of conservative lending standards. Cyclone Ditwah affected 60–70 branches, but operations were restored within weeks. Mortgage exposure linked to the cyclone was limited—less than Rs5 billion against a loan book of roughly Rs1.8 trillion—helped by technical clearances and risk buffers built into property-backed lending.
Technology has been a critical enabler. About 83% of transactions are now digital, with three-quarters of new digital registrations in 2025 coming from outside the Western Province. Transaction volumes rose 25% year on year, while values increased 35%. More than 99% of retail loans are originated digitally, with corporate credit systems now being upgraded to support data-driven decisions.
Efficiency gains have been structural. Since 2016, headcount has risen only marginally from under 8,000 to below 8,500, even as total assets more than tripled to about Rs3.8 trillion. Productivity gains from digitisation and streamlined processes translated directly into profitability.
Leadership, agility and the road ahead
Fonseka attributes much of the turnaround to leadership choices: delegating authority down the organisation, encouraging judgement calls and reinforcing accountability. A refreshed leadership team in 2023 helped embed that culture.
Looking to 2026, People’s Bank is targeting credit growth of 15%–20%, with around 90% expected from the private sector. Capital-efficient products such as pawning, alongside SME, corporate and retail lending, will drive expansion. All of which are funded internally, given the bank’s liquidity position.
Agility, however, will define the next phase. Competing with private banks means shedding bureaucratic inertia while continuing to serve segments others may avoid, including close to one million Aswesuma beneficiaries who bank with People’s Bank.
Capital-market access is also on the horizon, with a potential listed debenture issue in 2026 following governance reforms, and a formal dividend policy under development.
People’s Bank’s 2025 performance offers a case study in that balance: commercial strength built on risk discipline, enabled by technology, and anchored in public purpose. The challenge now is sustaining that momentum in a more competitive, private-sector-led phase of Sri Lanka’s recovery.