Kathmandu. Nepal Automobile Importers and Manufacturers Association (NAIMA) has demanded that the loan-to-purchase ratio (LTV) of vehicle hire-purchase loan be maintained at 80 percent. Nepal Rastra Bank (NRB) has requested the Ministry of Finance to increase it from the existing 60 percent to a maximum of 80 percent.

According to Naima, the current 60 percent limit is one of the main reasons for the slowdown in the automobile market. Many consumers are unable to purchase vehicles due to higher initial payment requirements, which has not only reduced sales but has a direct impact on overall economic activity and revenue collection.

The automobile sector is one of the major contributors to the government’s revenue through customs duty, excise duty and VAT . According to Naima, the increase in vehicle sales will have a positive impact on revenue collection.

Considering the high liquidity situation prevailing in the banking system, increasing the loan-to-value ratio in auto loans can be a practical and effective way of capital mobilization. Hire-purchase loans are based on installment system and are issued with collateral security, so it is considered a relatively safe loan segment.

According to Naima, policy facilitation is necessary as the sale of vehicles will create direct and indirect employment by activating the service center, spare parts, insurance, financial services, transportation, technical service and other ancillary industries.

In view of the above facts and circumstances, NAIMA has again urged the concerned agencies to review the policy by maintaining the loan-to-value ratio (LTV ratio) of vehicle hire-purchase loan to a maximum of 80 percent. In line with its mission of “Mobility for All”, NIEMA has been continuously advocating for this important issue and pledged to remain active in policy reform and coordination in the days ahead.