The rating actions follow Fitch's periodic review of the large and midsized finance companies in Sri Lanka.The companies in the peer group remain predominantly exposed to vehicle financing. Fitch expects growth potential in the vehicle financing segment to be limited due to the increase in import tariffs for cars and the central bank's imposition of a 70% cap on loan to value ratio for loans extended for the purpose of acquiring or using motor vehicles. Fitch expects asset quality and capitalisation to deteriorate in the sector following aggressive loan book growth in recent years and challenging operating conditions,which were signalled in Fitch's downgrade of Sri Lanka's sovereign rating to 'B+' from 'BB' in February 2016.

Fitch's ratings on the finance companies in the peer group are driven by their business model and franchise, and their risk appetite, which is reflected in their exposure to more vulnerable customer segments. Finance Companies with Institutional Support Driven LongTerm RatingsPLC's Issuer Default Rating (IDR) and National LongTermRating continue to reflect Fitch's view that PLC's parent, the state owned and systemically important People's Bank (AA+(lka)/Stable), would provide extraordinary support to PLC, if required. People's Bank's propensity to support PLC stems from its 75% shareholding in PLC, common brand and PLC's position as a "strategic subsidiary" of the bank.The finance company accounted for 29.6% of the bank's consolidated post tax profits and 9.9% of total assets at end March 2016. In addition to its own branches, PLC has 110 window offices within branches of People's Bank. The parent's ability to provide support to PLC stems from the limited ability of the sovereign (B+/Negative) to provide such backing.The negative Outlook on the IDR mirrors that on the sovereign's. Fitch maintains a Stable Outlook on theNational LongTerm Rating, in line with that of People's Bank, as this is a measure of relative strengthbetween issuers within Sri Lanka.AMCL's rating reflects Fitch's view that support would be forthcoming from Associated Motorways Private Limited (AMW), which owns 90% of AMCL, given the finance company's strategic importance to the parent. This is based on AMCL's role in the group, the common AMW brand and the existence of common creditors, which contribute to high reputational risk for AMW if AMCL were to default. In addition AMW remains a key source of funding for AMCL; 53% of AMCL's total funding at end2015 was either directly borrowed from or guaranteed by AMW.