NRB Tightens Loan Limit for Hire Purchase Companies on Electric Vehicles

Nepal Rastra Bank (NRB) has tightened its policy and regulatory framework for hire purchase companies by amending the Policy and Procedural Arrangement for Granting Approval to Provide Hire Purchase Loans, 2070. Under the new rule, hire purchase companies can now finance only up to 60% of the value of electric vehicles.

Previously, through a mid-term review of the monetary policy, NRB had instructed banks and financial institutions to limit financing to 60% for all types of electric vehicles. However, hire purchase companies continued financing up to 80% of the vehicle's value. To plug this loophole, NRB has now legally amended the rule to enforce the same 60% financing cap on hire purchase companies as well.

Specifically, Clause 10 (Ga) has been revised to clearly state that loans for purchasing vehicles must not exceed 60% of the vehicle’s value. Meanwhile, Clause 9 (Ga) maintains that in general mortgage lending, companies can still finance up to 80% of the collateral value.

The amendment distinctly applies to two categories: (a) all-purpose electric vehicles and (b) personal-use other vehicles. For both categories, the loan-to-value (LTV) ratio must now be capped at 60%.

NRB’s decision is expected to instill stricter financial discipline among hire purchase companies and push buyers of electric vehicles to arrange for higher down payments.