Nepal Rastra Bank says loan-to-value limits were brought in after the 2007/08 global crisis to keep vehicle lending under control when capital alone was not enough.
At a NAIMA event in Kathmandu, NRB director Satyendra Suvedi said the cap is meant to reduce risk for borrowers, lenders and importers if defaults rise. He said the policy can change depending on state policy decisions and broader economic thinking.
Suvedi also drew a clear line between auto loans and hire-purchase loans. He said the two should not be confused.
Hire-purchase finance exists so buyers can get smaller loans through simpler regulation when bank paperwork becomes heavy, he said. That is the purpose of the arrangement.
He added that the current hire-purchase loan-to-value ratio is 80% for EVs and 60% for IC vehicles. The sector now has Rs 1.42 kharba in hire-purchase lending out of total credit of Rs 60 kharba.
Bad loans remain low. He said the risk of an auto-loan credit bubble does not look likely right now.
Writes on vehicle pricing, taxation and the Nepali auto market from ongoing tracking of distributor price lists. Editorial policy.
