KATHMANDU: Bank and financial institutions disbursed Rs 6.84 billion in hire purchase loans to finance motor vehicle purchases in the first 11 months of the current fiscal year 2024/25, a 5.51% growth compared to the same period of the previous fiscal year.
Total outstanding hire purchase loans stood at Rs 130.94 billion in mid-June, up from Rs 124.10 billion in mid-June last year, data released recently by the Nepal Rastra Bank (NRB) shows.
This marks a rebound in hire purchase loans after two years of decline. With the economy slowly recovering, automobile dealers are seeing a surge in demand, which has increased hire purchase loan disbursements.
While commercial vehicle loans increased by 1.8%, while loans for personal vehicles rose sharply by 14.4%
Vehicle imports have gone up significantly compared to last year. Around 18,000 units of four-wheelers, including cars, jeeps and vans, have been imported into the country over the first 11 months of the current fiscal year. Similarly, more than 100,000 two-wheelers and more than 8,000 minibuses, microbuses, buses and trucks have entered the country during the same period.
Despite tighter regulations by the Nepal Rastra Bank (NRB), banks and financial institutions have increased their lending in the hire purchase segment. The central bank, in its mid-year review of the monetary policy, reduced the loan-to-value (LTV) ratio for electric vehicles EVs from 80% to 60%. This policy change means banks are allowed to finance only 60% of an EV’s price. Despite this, banks still disbursed Rs 6.84 billion in new hire purchase loans this fiscal year.
Growth in Both Personal and Commercial Vehicle Loans
Bank lending has gone up for both personal and commercial vehicles.
While loan disbursements for commercial vehicles had been declining until mid-April, it has picked up after mid-May.
According to the central bank, commercial vehicle loans increased by 1.8%, while loans for personal vehicles rose sharply by 14.4%. By mid-July last year, commercial vehicle loans stood at Rs 87.26 billion. This increased by Rs 1.53 billion to reach Rs 88.79 billion by mid-June 2025.
Similarly, personal vehicle loans went up from Rs 36.84 billion in mid-July last year to Rs 42.15 billion in mid-June this year.
Although commercial vehicle loans have grown at a slower rate than personal vehicle loans, the total amount disbursed for commercial vehicles is more than twice that of personal vehicles. By mid-June, banks had issued Rs 88.79 billion in loans for commercial vehicles, compared to Rs 42.15 billion for personal vehicles.
