Big Banks Cease Auto Loan Services: Nabil and Standard Chartered Amongst Them
Big banks and financial institutions have ceased offering auto loans, including the country’s largest bank, Nabil, and international bank, Standard Chartered. This move has impacted consumers who were looking to purchase cars and companies that sell vehicles, as the banks have suddenly stopped giving loans.
The ban on the import of vehicles was lifted by the government after about 9 months, which was seen as a positive sign for the banks to resume lending. Banks started opening LCs for car imports from January 1st, however, they have now stopped giving loans to customers who want to buy cars.
The discontinuation of the auto loan product by banks is believed to be due to its high risk factor. The Central Bank had increased the risk burden of auto loans to 150 percent and kept it in the high risk list, leading banks to stop offering the loan product.
Despite the high interest rate, the demand for loans in the auto sector was gradually increasing. However, even though customers were willing to take a loan at a high interest rate to buy a car, the banks have stopped giving loans. The reason behind the cessation of auto loans by Standard Chartered Bank has not been specified.
Nepal Rastra Bank had eased the burden on businessmen by removing the cash margin requirement for opening LC for vehicle import. But with the sudden halt in the auto loans, both businesses and consumers looking to buy cars are facing difficulties. The future of the auto loan product is uncertain, with Standard Chartered Bank stating that it is not possible to say when it will be opened again.