Central Bank of Nepal Increases Down Payment on Automobiles

Creating despair among customers purchasing automobiles this festive season, the Nepal Central Bank increased their down-payment.

According to the Nepal Rastra Bank’s (NRB) announcement on November 09, 2018, the authority has decreased the loan-to-value-ratio to 50 percent from the current 65 percent. Following this, automobile purchasers will pay Rs 1.5 million down-payment, if a car’s value is Rs 3 million.

The Central Bank took this decision in a bid to control the increasing import of vehicles, specially luxury vehicles, over the last few years.

“Data shows that vehicle import is growing at an alarming rate which is not good for the economy even though the automobile sector is a major revenue contributor to the government,” said Narayan Prasad Poudel, NRB Spokesperson.

Similarly, the Central Bank’s decision of controlling automobile financing also seeks to address its credit crunch which causes a major chunk of its revenue to go abroad.

According to government statistics, in the last eight years the number of vehicles in Nepal has doubled to 3.2 million!

Besides customers, NRB’s decision is also likely to hit private vehicles’ sale as dealers say that more than 60 percent vehicles in the market are sold through financing.

“As high taxes have made vehicles costlier in Nepal, people seek financing from banks and financial institutions while purchasing vehicles. However, squeezing auto financing will certainly discourage potential buyers,” said Saurabh Jyoti, Chairman, Syakar Trading Company and former Nepal Automobile Dealers’ Association President.

Jyoti  said that the automobile industry was not unproductive for lending as the it contributed to 20 percent of the total government revenue collected every year. He also adds that no economy can grow by attempting to squeeze the automobile industry.