A report by CAL Research said gross NPL ratios of banks had risen 72 basis points to an average of 4.7 percent by June 2013 from a year earlier.
NPLs at PABC rose 365 basis points to 7.8 percent, NTB was up 114 basis points to 4.0 percent, HNB was up 89 basis points to 4.6 percent and Commercial Bank was up 67 basis points to 4.0 percent.
NDB was up 54 basis points to 1.9 percent, Sampath up 46 basis points to 2.5 percent and Union Bank was up 25 basis points to 5.7 percent.
At Seylan, NPLs declined 184 basis points to 11.2 on a higher earlier base.
Loan loss charges were higher partly due to gold-backed (pawning loans) as gold prices fell. Loan to value ratios were now reduced to 60 to 65 percent from an earlier 80 to 85 percent.
Bank forex earnings were also down despite a weakening rupee, as the swap cost of dollar loans hit bank earnings.
But capital adequacy at listed banks was above the minimum 10 percent despite some weakening the report said. Capital ranged from 18.3 percent at NDB to 12.6 percent at Sampath.
Bank loan to deposit ratios were also narrowing with deposit growth averaging 8.7 percent compared to 6.5 percent for loans.
Sri Lanka is recovering from a balance of payments crisis and interest rates have peaked and credit has slowed.
In a typical balance of payments crisis triggered by a so-called soft-pegged central bank, the monetary authority buys Treasury bills into its balance sheet from the banking system and the state and injecting loanable reserves into banks as central bank credit (printed money).
The action triggers sharp increases in credit growth far out of line with the deposits raised by the banking system, creating import demand and an economic bubble, currency trouble and foreign reserve losses.
When credit slows the central banks is able to build up foreign reserves as loan to deposit ratios improve by selling down its Treasury bill stock into the banking system.
But if the government continues to borrow heavily or has to make foreign net repayments, banks will instead take newly issued Treasury bills and maintain overall credit pressure in the economy from state and private loan demand.
In such a situation, loan to deposit ratios can improve but central bank foreign reserves can fall or stagnate.