Himalayan News Service

Kathmandu, March 17:

Thanks to the easy availability of auto loans that commercial banks provide, the domestic automobile market is growing fast. Unfavourable environment for large investments, contrasted by a stable market for retail lending has encouraged commercial banks to focus on this area more than the others. The steady income source is a pre requisite for customers to be eligible for such a scheme. Depending upon the income of an individual, banks finance up to 90 per cent of a vehicle’s cost. The repayment period, service charge and interest on loans vary between commercial banks. However, almost all such banks are trying to provide quality service to come one up in this environment of fierce competition. Bank of Kathmandu (BoK) has been providing auto loans at an interest rate of 7.5 per cent and the repayment period is five years. It charges one per cent of the loan as service charge. To be eligible for car loans offered by BoK, a customer should have a minimum earning of Rs 200,000 per annum.

“Depending upon the income of customers, the vehicle loan is sanctioned and there is no ceiling for any maximum amount the bank could finance. It solely depends upon the earning of an individual,” said Sujan Acharya, assistant relationship manager at BoK. “Since there is no environment for big investment, the bank is trying to cater to individuals. BoK so far has about 200 customers enjoying its auto loans,” Acharya said. Kumari Bank Ltd (KBL) offers a maximum of 70 per cent of the total cost of a vehicle and charges 10 per cent interest, with one per cent service charge. The loan period is five years. The proof of steady income and net saving after deduction of expenditure are considered before offering any loan to a customer, said Bishow Regmi, relationship manager at Kumari Bank. KBL has been a leading player in this market till sometimes back. But now, KBL is not aggressively focusing on the auto loans, as the field is nearing its saturation point, Regmi added.

Everest Bank Ltd has 500 borrowers and about Rs 300 million investment in vehicle loans. The bank charges a maximum of nine per cent interest rate and repayment could be made in 60 equal monthly instalments. Though two million rupees has been fixed as the maximum loan amount, but it may be extended further, said Arati Rana, officer at EBL. The concept of ‘owe something now and pay later’ has attracted a huge number of customers and we are working to tie up with automobile dealers so that interest rate could be reduced further, she said. “Credit management plays a crucial role in keeping the bank safe from risks. For security, vehicles are registered in the Bank’s name and borrowers need to have collateral acceptable to bank.” “The Himalayan Bank Ltd started to consider consumer financing as a good investment area nearly four years ago and one of the sectors was auto loan. Today we are trying to introduce sellable consumer packages in the market and the auto loan is a stable market for retail lending,” said Aasha Adhikari, manager at Himalayan Bank Ltd, Maharajgunj.

HBL has invested about Rs 960 million in auto loans. Private-owned vehicles hold almost 60 per cent share of this investment. The bank charges a maximum of eight and half per cent interest, while the interest rate is lower for dealers that Himalayan Bank has tied up with. The bank finances a maximum of up to 90 per cent of the total cost, with the lending period being seven years. The customer has to pay one per cent service charge before loan disbursement. “HBL also offers pre-payment of instalments and entire loan settlement can be made prior to the loan term, by paying a nominal charge,” Aasha said. Nabil Bank offers loans for purchase of new vehicles and used vehicles with repayment duration generally being five years. The same however could be extended up to seven years for some specific brands of vehicles. All individuals as well as corporate entities who have steady certified income sources can have access to car loans offered by Nabil bank. “We have now established ourselves as one of the key players in the field of auto finance and we shall continue it in the years ahead with revised and competitive rates and facilities,” said Suresh Tripathi at Nabil Bank Ltd.

Standard Chartered bank is another player in this segment. Its interest rate varies from 7. 5 per cent to 9.5 per cent and the service charge is one per cent of the financed amount, as processing fee. For new vehicles, Standard Chartered finance goes up to 90 per cent of the invoice price. Verifiable income, repayment source and willingness to repay along with customer’s credibility and repayment capacity are looked into before approving a vehicle loan.