KHATMANDU: There has been visible impact on automobile business, especially on the sales of private cars, following the central bank’s decision restricting banks and financial institutions (BFIs) from extending auto loans of over 50 per cent of the value of the vehicle to customers.
Through the mid-term review of the Monetary Policy in February, Nepal Rastra Bank (NRB) had fixed the loan-to-value ratio in automobile financing for private vehicles at 50 per cent. Following this restriction, sales of four-wheelers in the domestic market has decelerated, government statistics show.
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As per the data maintained by the Department of Transport Management (DoTM), import of vehicles under the car/jeep/van segment has dropped by over 11 per cent or 2,131 units in the eight months of 2016-17, compared to the corresponding period of the previous year. Government’s data shows that only 17,171 units of cars were registered in government offices until mid-March this year against 19,302 units registered during the same period of 2015-16.
“The NRB restriction has had a high impact on sales of private four-wheelers as more than 80 per cent of cars sold in the market are financed by banks,” said Saurabh Jyoti, former president of the Nepal Automobile Dealers’ Association (NADA).
However, the cap on loan-to-value ratio of the government has not affected the sales of two-wheelers. DoTM data show that registration of two-wheelers in the country increased by eight per cent in the first eight months of 2016-17 compared to the registration data in the same period of previous year. As per data, Nepal imported 199,908 units of two-wheelers until mid-March this fiscal year against 182,073 units imported during the same period of 2015-16.
As per Jyoti, more than 80 per cent of two-wheelers sold in the market are paid for entirely by the customers without seeking any financing facility.
On top of that, Jyoti said that the halt in auto loan disbursement to automobile sector is illogical and the decision has to be revisited.
“There exists no logic behind categorising automobile sector as an unproductive sector to lend as this sector is playing a crucial role to give momentum to the country’s economy and generating one of the largest revenues for the government,” he said.
