KATHMANDU: Nepal Rastra Bank has continued to introduce flexible measures to support economic activity, but the central bank has kept its policy on the automobile sector largely unchanged over the past year.
Since the last fiscal year, the central bank has gradually eased its monetary policy through quarterly reviews. Measures have included lowering interest rates, encouraging credit expansion, allowing loan restructuring and rescheduling, expanding credit limits in several sectors, and revising blacklist-related provisions.
These steps have helped improve liquidity and investment across sectors such as small and medium enterprises, large industries, agriculture, the stock market, real estate, and trade. However, policy related to the automobile sector has remained largely stable for about a year.
According to the central bank, no major changes have been made to automobile-related regulations since May 2025. While several sectors received policy adjustments in monetary policy reviews during the current fiscal year, the automobile sector has largely continued under the same framework.
Automobile businesses have repeatedly urged the central bank to revise financing provisions. Their key demands include raising the loan-to-value (LTV) ratio for vehicle loans to 80:20, reducing the risk weight on auto loans to 75 percent, easing vehicle import procedures, and recognizing the automobile sector as an industrial sector.
However, the central bank did not revise these policies in the monetary policy for FY 2025/26, nor during the first quarterly review or the mid-term review.
Previously, the regulator had gradually relaxed certain restrictions. In the FY 2022/23 monetary policy, the central bank significantly tightened vehicle lending rules by increasing the risk weight on auto loans from 75 percent to 150 percent. Later adjustments gradually eased the restriction.
The most recent revision came in May 2024, when the risk weight on vehicle loans was reduced to 100 percent during the third quarterly review of the FY 2023/24 monetary policy. Since then, the main provisions related to automobile lending have remained unchanged.
In the current fiscal year’s monetary policy, the central bank mainly introduced procedural provisions related to hire-purchase lending companies. These included “fit and proper test” requirements, rules for calculating loan interest rates, and guidelines on service charges. Other provisions were largely carried forward from previous policies.
Officials at the central bank say the current policy framework for the automobile sector is considered appropriate. According to them, further relaxation could create financial risks in the future.
“Policy adjustments are made after analyzing the overall economic situation and long-term impact,” a central bank official said. “Many issues in the automobile sector were already addressed in last year’s monetary policy, so there is no immediate need for further changes.”
The official added that the central bank will continue to review the situation and adjust policies if necessary.
EV financing tightened
While several sectors have received policy support over the past year, financing for electric vehicles has seen stricter regulations.
During the mid-term review of the monetary policy in February 2025, the central bank reduced the loan-to-value ratio for electric vehicles. Previously, buyers could receive loans covering up to 80 percent of the vehicle price, but the limit was reduced to 60 percent. This effectively increased the required down payment from 20 percent to 40 percent.
Nepal has seen rapid growth in electric vehicle adoption. According to 2025 data, electric vehicles accounted for about 73 percent of new car sales in the country.
Automobile businesses say the tighter loan rules could slow the pace of EV adoption.
However, the central bank simultaneously eased financing for internal combustion engine (ICE) vehicles. The loan-to-value ratio for ICE vehicles was increased from 50 percent to 60 percent, allowing buyers to access higher loan coverage.
