NRB Policy to Blame for Lacklusture Demand for Vehicles

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NRB Policy to Blame for Lacklusture Demand for Vehicles

February 3: The demand for vehicles, which has been sluggish for almost ten months, will take more time to return to normalcy. As the Nepal Rastra Bank is yet to revise itd policy, which importers consider to be the main reason for the decrease in the demand for vehicles, there is no possibility of an immediate increase in sales.

Around ten months ago, Nepal Rastra Bank raised the risk weight of auto loans from 75 to 150 per cent. Auto traders state that the sale of vehicles decreased with the introduction of the policy.


Nepal Rastra Bank increased the risk weight to discourage investment in unproductive sector. As a result, banks have started reducing credit flow in those areas.

In the meantime, the government also imposed a ban on the import of vehicles run on petrol and diesel for private purposes for eight months. Although the liquidity in the banking sector has improved recently, the businesses express that the sale of vehicles has not increased.

After the decrease in the demand for vehicles, the auto traders did not even check the vehicles arriving at the customs checkpoint. Businessmen said that they did not pass the customs clearance because they have to pay more revenue than the price for the import of vehicles. In addition to that, they have to bear the loss due to the lack of sales of vehicles despite such large investments.

If the auto traders do take away the vehicles, the government is also be deprived of the revenue it should get..

Dhruba Thapa, president of the National Automobile Dealers Association (NADA), an organization of auto dealers, said that the policy of NRB is to blame for the lacklusture demand for vehicles. “NRB increased the risk weight of auto loans from 75 to 150 per cent. Because of this, banks are not willing to invest in this sector," he said.

Thapa said that due to the high-risk load, banks have gone to safe areas with low risk instead of autos.

Thapa also urged the NRB to seriously consider the situation in the automobile sector and reduce the risk burden. However, the officials of the NRB argue that since the country is in a difficult situation, it is not possible to improve everything at the same time and that the improvement will come gradually.

However, auto traders are worried that the automobile sector will collapse until NRB makes policy reforms.

Thapa said that the 50 per cent down payment has also added to the problem.

"The customer does not have cash, so how can the sale be made after a 50 per cent down payment?" he asked.

According to him, the customers are confused because they have to spend a lot of cash, while earlier they could buy a car even by spending a small amount of cash.

Officials of NRB said that the policy has been introduced based on long studies, practice and experience, taking into account all aspects of the economy. For a long time, there was pressure on Nepal's foreign exchange reserves.

This policy has come in a situation where the current account deficit is high, and liquidity is low," said NRB spokesperson Gunakar Bhatt.

Bhatt also said that NRB expects businesses to move forward with their plan after gradual improvement in all aspects of the economy.


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