Kathmandu. Nepal Automobile Importers and Manufacturers Association (NAIMA) has requested the Nepal Rastra Bank (NRB) and the Ministry of Finance to increase the loan-to-value ratio of vehicle hire-purchase loan from 60 percent to a maximum of 80 percent.
According to Naima, the current 60 percent limit is one of the main reasons for the slowdown in the automobile market. Due to the high upfront payment requirements, many consumers are unable to buy vehicles, which has not only reduced sales but has a direct impact on overall economic activity and revenue collection.
The automobile sector is one of the major contributors to the government’s revenue through customs duties, excise duty and Value Added Tax (VAT). Naima believes that the increase in vehicle sales will have a positive impact on revenue collection.
Considering the high liquidity situation in the banking system, increasing the loan-to-value ratio in vehicle loans can be a practical and effective way of capital mobilization. Hire-purchase loans are based on installment system and are issued with collateral security, so it is considered as a relatively safe loan segment. According to Naima, policy facilitation is necessary as the sale of vehicles will activate the ancillary industries such as service centers, spare parts, insurance, financial services, transportation, technical services and other direct and indirect employment opportunities.
In view of the above facts and circumstances, NIMA has again urged the concerned bodies to review the policy by maintaining the loan-value ratio of vehicle hire-purchase loan to a maximum of 80 percent. In line with its mission of “Mobility for All”, NIEMA has been continuously advocating for this important issue and pledged to be active in policy reform and coordination in the days ahead.
