Sri Lanka, April 16 -- Bad loans in Sri Lanka's banking sector have peaked, though there is an increase in specialized banks, and capital buffers have strengthened, by the December quarter of 2024, official data shows.

Stage 3 non-performing loans in Sri Lanka's banks fell to 12.1 percent of total advances in the by December quarter from 12.7 percent in the September quarter, after peaking at 13.9 percent in the September 2023 quarter at 13.9 percent.However, Stage 3 bad loans at licensed specialized banks climbed to 12.3 percent by the end of the December 2024 quarter from 11.9 percent in the third quarter for reasons that are not clear.

The NPL ratio is a result of both new bad loans, perhaps going up from State 2 to State 3 as well a...