Fernando, W.S.H.Madhushani, P.W.G.2024-09-092024-09-092024Fernando, W.S.H.; Madhushani, P.W.G. (2024), Impact of Economic Indicators on Loan Default : Evidence from the Banking Industry In Srilanka, 12th Students’ Research Symposium, Department of Finance, Faculty of Commerce and Management Studies University of Kelaniya Sri Lankahttp://repository.kln.ac.lk/handle/123456789/28152Purpose: The study intends to observe the impact of economic indicators on loan default in Sri Lanka. Methodology: The study was influenced by the Arbitrage Pricing Theory (APT) and the Credit Portfolio View (CPV) model. A quantitative approach was carried out by taking the population as the banking industry in Sri Lanka. Secondary data for the period of 1998-2022 was collected from the Central Bank (CBSL) website. Findings: Time series analysis revealed that the lending interest rate, inflation rate, and currency exchange rate have a positive impact on the default rate while a negative impact of economic growth on the default rate. However, higher lending interest rates significantly increase loan default. Originality: The study recommends that the policymakers, including the CBSL as the main regulatory authority of the financial system to manage the interest rates in a way that benefits the Economy as the high cost of funding has significant shortcomings in the business environment and leading to high credit risk.Loan Default, Economic Indicators, Macro Economic Variables, Banking Industry, Sri Lanka.