KATHMANDU: Intense competition has emerged among major commercial banks to provide loans for vehicle purchases in Nepal. As lending rates have fallen in recent months, more customers are taking auto loans, prompting banks to expand credit aggressively in this segment.
With the economy remaining sluggish for the past two years, credit demand has been weak in agriculture, manufacturing, and industrial sectors. However, demand for loans in automobiles and the stock market has continued to grow. To attract customers, banks are offering vehicle loans at low interest rates with flexible repayment options.
Commercial banks are currently providing auto loans for up to seven years. While overall business activity remains slow, long-term lending in retail sectors like automobiles is viewed as beneficial for banks, even at lower margins.
Strong competition is visible among large banks in hire purchase financing. Leading institutions include Global IME Bank, Nabil Bank, Rastriya Banijya Bank, Himalayan Bank, NMB Bank, Everest Bank, and Prime Commercial Bank. In contrast, foreign-owned banks have comparatively lower exposure to vehicle loans.
According to Nepal Rastra Bank data, hire purchase loans for vehicle purchases grew by 0.8 percent in the current fiscal year. The average base rate of commercial banks has dropped below 6 percent, and some banks are offering loans with as little as a 0.5 percent premium.
By the end of mid-September, banks and financial institutions had invested Rs 129.27 billion in hire purchase loans, of which commercial banks alone accounted for Rs 113.61 billion. Eight major banks together hold 61.26 percent of the total hire purchase portfolio.
Top Banks in vehicle loan disbursement
Nepal Rastra Bank data shows that Global IME Bank has provided the highest amount of vehicle loans Rs 15.51 billion, representing 13.65 percent of total hire purchase lending by commercial banks. Global IME, which has a base rate of around 5.5 percent, is also Nepal’s largest bank by paid-up capital.
Nabil Bank ranks second with Rs 11.58 billion in hire purchase loans.
Rastriya Banijya Bank, the state-owned commercial bank, follows with Rs 9.67 billion, also offering one of the lowest base rates in the market.
Four other banks; Himalayan (Rs 6.77 billion), NMB (Rs 6.71 billion), Everest (Rs 6.54 billion), and Prime Commercial (Rs 6.04 billion), have each lent between Rs 6 and 7 billion.
Prabhu Bank has invested Rs 5.16 billion, Nepal Investment Bank Rs 5.12 billion, Agricultural Development Bank Rs 4.81 billion, Citizens Bank Rs 4.58 billion, Kumari Bank Rs 4.39 billion, and Siddhartha Bank Rs 4.33 billion.
Similarly, Machhapuchchhre Bank has lent Rs 3.54 billion, Laxmi Sunrise Bank Rs 3.05 billion, and Nepal SBI Bank Rs 3.01 billion.
Meanwhile, Nepal Bank, NIC Asia, and Standard Chartered Bank have the lowest hire purchase portfolios. Standard Chartered provided just Rs 1.40 billion, Nepal Bank Rs 2.64 billion, and NIC Asia Rs 2.10 billion.
NIC Asia’s lower lending volume is attributed to its comparatively higher interest rates, while Standard Chartered and Nepal Bank have limited exposure to hire purchase loans due to internal policy decisions.
