NAIMA asks central bank to maintain 80 percent LTV ratio on all vehicle types

KATHMANDU, JUNE 5: The Nepal Automobile Importers and Manufacturers Association (NAIMA) has urged Nepal Rastra Bank (NRB) to retain a loan-to-value (LTV) of 80:20 on all types of vehicles in the upcoming monetary policy.

A delegation led by NAIMA President Ritu Singh Baidya met with NRB Governor Dr. Bishwanath Paudel yesterday to submit a set of policy recommendations aimed at expanding access to auto financing, boosting the automotive market, and supporting Nepal’s broader economic growth.

In its submission, NAIMA emphasized that both electric and internal combustion vehicles should be treated equitably in financial policies. "We highly appreciate NRB’s commitment to financial discipline and economic development. In this spirit, we request a review of the current LTV structure, which is aligned with international standards, vehicle types, and evolving market demands," the recommendation stated.

The association also raised concerns regarding the restrictions on opening Letters of Credit (LCs) in Chinese Yuan. Under existing regulations, importers are allowed to open LCs in Yuan only if the beneficiary company is based in China. However, NAIMA noted that in the current global business environment, many companies operate through tripartite arrangements involving manufacturers, suppliers, and beneficiaries located in different countries.

Therefore, NAIMA requested NRB to allow LCs in Yuan for vehicles that are manufactured and shipped from China, regardless of whether the beneficiary company is Chinese. This, the association argued, would align banking procedures with international trade practices.

Additionally, NAIMA recommended reducing the risk weight on auto loans from the current 100 percent to 75 percent. "Given the strong resale value and reliability of vehicles, this adjustment would facilitate easier access to auto loans, stimulate market growth, and maintain financial stability. Auto loans, as you are aware, carry one of the lowest default rates among all lending categories," the letter stated.

NAIMA expressed confidence that its recommendations will be considered and reflected in the forthcoming monetary policy.