Easier car loans energise auto sector The automobile market has been energised in recent days with banks and financial institutions (BFIs) reducing interest rates on auto loans. In addition, BFIs have been offering a number of schemes to their customers on the occasion of the festival season which has led to a surge in vehicle sales. The auto market that was booming about four years ago saw a downturn due to a slump in the realty business. However, the automobile business has started to rebound since last year, according to the Department of Transport Management which recorded a 20 percent growth in vehicle registrations in the last fiscal year. With growing demand, bank financing in the sector has also started to take an upward trend. Growing competition and adequate liquidity with BFIs have also compelled them to reduce interest rates on auto loans to 9-10 percent from up to 16 percent earlier. “In recent times, the automobile market has been improving along with the realty business,” said HP Kulkarni, deputy general manager at Everest Bank. The automobile market is also affected by the NADA Auto Show and Dashain as banks come up with attractive schemes targeting potential buyers from middle income groups. Bankers said that the people in the middle income group who mostly purchase small cars are the chief beneficiaries of the schemes offered during the period. Kulkarni said they were also planning to launch new schemes targeting vehicle buyers. Major automobile dealers like Hyundai, Maruti-Suzuki, Honda, Fiat and Skoda, among others, also said that they were witnessing a significant rise in footfall and inquiries for hatchback vehicles. Bankers said customers preferred buying cars under hire-purchase schemes at discounted rates offered during the NADA fair or Dashain. This year too, as the ninth edition of the NADA Auto Show has kicked off and Dashain is round the corner, a number of banks have come up with varied schemes to attract automobile lovers to take auto loans to buy cars of their choice. “Easy monthly instalments, low rate of interest and a number of schemes have helped influenced more and more people to buy cars,” said Diwakar Poudel, head corporate affairs at Standard Chartered Bank Nepal. Standard Chartered has been offering auto finance at 9 percent, down from 9.99 percent in normal times. According to the bank, they have mainly focused on salary earners to finance vehicles. “Based on the salary sheet and repayment capacity, customers can receive a loan,” said Poudel. In addition, the bank has also been offering subvention schemes at the exhibition. “Under the scheme, customers can purchase certain variants of Figo cars at an interest rate of just 7.99 percent,” he added. The bank has also been providing free credit card service to its customers who purchase vehicles under its schemes. Standard Chartered provides auto loans with a maturity period of five years. According to the bank, its auto finance portfolio is worth more than Rs 3 billion. Meanwhile, NIC Asia Bank has also come up with three products—normal Auto Loan, Pre-Approved Home Loan and Auto Balloon Financing—targeting the NADA auto show. The bank provides regular auto loans at 9.99 percent interest. With regard to the pre-approved system of lending, the bank decides the loan amount and the interest rate based on the customer’s income. Similarly, Auto Balloon Financing allows customers to pay 70 percent of the loan in instalments for 24 months and the rest in the next four years. The maturity period for the entire package is six years. Sunil Pokhrel, head Retail Banking at NIC Asia, said the products were designed to increase the access of the general public to automobiles. “Depending on market demand, we can extend the offer even after the NADA show,” added Pokhrel. NIC Asia’s auto loan portfolio is worth Rs 3-4 billion. According to Nepal Rastra Bank, BFIs have issued auto loans worth Rs 54 billion. Out of the total amount, the share of commercial banks amounts to Rs 34 billion. Similarly, development banks and finance companies have invested Rs 12 billion and Rs 7 billion respectively in the sector. Most of the commercial banks and development banks have been providing auto loans mainly to buy four-wheelers while the people mostly rely on finance companies and cooperatives for loans to buy two-wheelers.
Posted on: Thu, 12 Sep 2013 04:06:45 +0000
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