Nepal Rastra Bank (NRB) has set an electric vehicle aka EV loan-to-value ratio to 60 percent. From now on, banks and financial institutions (BFIs) will need to invest 60% in EV loans. The bank made the arrangement during its mid-year financial assessment.
The new loan-to-value ratio in EVs applies to all EVs bought by customers for their personal and business uses. The decision has left the industry stakeholders bemused and described that it was against the government’s policy to promote electric vehicles.
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NRB increases ev loan-to-value ratio in Nepal
The decision to set EV loan-to-value at 60% means EV buyers will now need to pay 40% in downpayment. Previously, the threshold was 80% which allowed prospective buyers to only pay 20% in down payment. That means banks and financial institutions could invest up to 80%. So, NRB increased the loan-to-value ratio by 20%.
However, NRB has made it slightly more flexible for combustion engine vehicles. In its monetary policy mid-year assessment, the central bank increased the ratio to 60%. That means BFIs can invest 60% in tailpipe vehicles. Previously, the ratio stood at 50%. So, if you were to buy a gas-powered vehicle, you can now pay a down payment of 40% only. That’s a slight relief coming from 50% previously.
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EV industry affected!
NRB’s 60% loan-to-value ratio on EVs could affect the EV industry. Industry experts say that increasing the limit could impact potential buyers’ decision to buy an EV. The banks’ feasible financial services were one of the reasons to buy an EV in Nepal. But customers need to pay 40% in down payment could hurt their pockets.
The decision likewise has drawn strong opposition from the industry. National Automobile Dealers Association (NADA) hosted a press conference in which, the prominent auto body called on the government to reinstate the previous loan-to-value ratio.
Nepal is seeing a growing number of EV brands competing in the auto market. On the other hand, the government is also seemingly promoting the shift to eco-friendly transport. But having to pay 40% upfront could force customers into reconsideration.
At the same time, vehicles with Internal Combustion Engines (ICE) could find some relief with the new policy with a 60% loan-to-value ratio set on BFIs.
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Are you concerned with the new EV loan-to-value ratio set by NRB? Will it possibly hurt the customers considering buying an EV? Share your opinion in the comments below.