NAIMA has urged the Nepal Rastra Bank and the Ministry of Finance to increase the loan-to-value ratio of hire-purchase loans for all types of vehicles from 60 percent to a maximum of 80 percent.
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The Nepal Automobile Importers and Manufacturers Association (NAIMA) has urged the Nepal Rastra Bank and the Ministry of Finance to increase the loan-to-value ratio of vehicle hire-purchase loans from 60 percent to a maximum of 80 percent for all types of vehicles.
NAIMA has stated that the current limit of 60 percent is causing a slowdown in the automobile market. Many consumers have been unable to purchase vehicles due to high down payment requirements, which has not only led to a decline in sales but also directly impacted overall economic activity and revenue collection, NAIMA claims.
'The automobile sector is one of the sectors that contributes significantly to the government's revenue through customs duties, excise duties and value-added tax,' a statement issued by NAIMA states. 'It is believed that an increase in vehicle sales will have a tangible and positive impact on revenue collection.'
Considering the current excess liquidity in the banking system, NAIMA believes that increasing the loan-to-value ratio in vehicle loans could be a practical and effective measure for capital mobilization. NAIMA has stated that since hire-purchase loans are based on an installment system and are disbursed with collateral security, it is considered a relatively safe loan segment.
NAIMA has stated that policy facilitation is necessary in this sector as vehicle sales create direct and indirect employment by activating ancillary industries including service centers, spare parts, insurance, financial services, transportation, and technical services.
NAIMA has once again urged the relevant bodies to review the policy by maintaining the loan-to-value ratio of vehicle hire-purchase loans at a maximum of 80 percent.
