Over NPR 200 Billion in Loans for Nepal’s Automobile Sector

Nepal’s automobile sector has received over NPR 200 billion in loans from banks, financial institutions, and hire purchase companies, according to Guru Prasad Paudel, Executive Director of Nepal Rastra Bank (NRB). Speaking at a program during the NADA Auto Show on Friday, Paudel stated that the central bank does not consider the auto sector to be “unproductive.”

Paudel highlighted that the NRB has prioritized this sector by issuing licenses to hire purchase companies since 2070 BS. Currently, ten hire purchase companies alone have invested over NPR 26 billion in auto loans.

Loan-to-Purchase Ratio and Interest Rates
According to Paudel, customers in Nepal can typically get a loan for up to 60% of a vehicle’s cost, after making a 40% down payment. He noted that this “Loan-to-Purchase” (LTP) ratio is comparable to international standards, which range from 60% to 80%. He suggested that different LTP ratios and interest rates could be applied to personal and commercial vehicles in Nepal.

Incentives for Manufacturing: Paudel also mentioned that banks readily provide loans to domestic manufacturing industries. Companies producing goods in Nepal can get loans of up to NPR 20 million with an interest rate that is only 2% above the base rate.

Agricultural Development Bank’s Investment: Govinda Gurung, CEO of Agricultural Development Bank, confirmed that his bank, while primarily focused on agriculture, also diversifies its loans into other sectors like automobiles. He stated that the bank evaluates factors like the customer’s intent, personal assets, and the vehicle brand before approving a loan.

Low Non-Performing Loans in Hire Purchase Sector
Baburam Sharma, CEO of Venture Hire Purchase, reported that his company has invested NPR 26.5 billion in the auto sector. He added that the sector has a low rate of non-performing loans (NPLs) and that the demand for loans, particularly for electric vehicles, is on the rise.

Krishna Dulal, Deputy Coordinator of the Tax and Revenue Committee of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), expressed optimism about the auto sector’s future. He called for a policy that would allow employees to take out vehicle loans for up to 20 years, stating that this would enable more people to afford a vehicle.