KATHMANDU: The Nepal Automobile Importers and Manufacturers Association (NAIMA) has urged the Nepal Rastra Bank and the Ministry of Finance Nepal to increase the loan-to-value (LTV) ratio for vehicle hire-purchase loans from the current 60 percent to a maximum of 80 percent.
NAIMA said the existing 60 percent LTV limit has slowed down the automobile market. The association stated that high down-payment requirements have made it difficult for many consumers to purchase vehicles, resulting in lower sales.
According to NAIMA, the automobile sector is a major contributor to government revenue through customs duties, excise duties, and value-added tax. The association said higher vehicle sales would directly support revenue collection and overall economic activity.
NAIMA also pointed to the current high liquidity in the banking system. It said increasing the LTV ratio for vehicle loans could be a practical way to mobilize capital.
The association noted that hire-purchase loans are installment-based and backed by collateral, making them a comparatively secure lending segment for banks.
NAIMA further stated that vehicle sales support several related industries, including service centers, spare parts businesses, insurance, financial services, logistics, and technical services. The sector also generates both direct and indirect employment.
The association has again requested regulators to review the policy and set the maximum LTV ratio for vehicle hire-purchase loans at 80 percent.
