Auto sales zoom due to easier bank loans
KATHMANDU, SEP 04 -
Had banks been apathetic to providing loans to purchase vehicles, the automobile market would not have been as energetic as it is today. The high level of liquidity with banks has made them come up with various loans products besides lower their interest rates sufficient to boost the auto market.
The auto market had been struggling until last year when banks were reluctant to provide credit at a low rate of interest citing a liquidity crunch. After banks reduced the interest rate on auto loans, the market started to grow in an upward spiral.
With changing lifestyles of the people and an expanded road network mainly in the Kathmandu valley, demand for four-wheelers has been escalating year by year. The statistics of the Department of Transport Management also show that new vehicle registrations have jumped to 170,084 from 198,343 units in the last three years. As of the fiscal year 2013-14, a total of 1.75 million vehicles were registered in the department.
Automobile dealers have attributed the growth to the easy loans being provided by banks.
They said that a large chunk of the total annual transactions of four-wheelers mainly takes place during the NADA Auto Show and the Dashain and Tihar festival season. “Sales during the period account for 30-40 percent of the sales of the entire year,” said Karan Chaudhary, executive director of CG Motocorp.
According to bankers, the interest rate that they used to charge on auto loans was up to 16-17 percent annually a few years back, and it has now come down to 8 percent on average. “The discount on interest rates along with various schemes offered during the NADA Auto Show has mainly helped to boost auto loans significantly during the period,” said Diwakar Poudel, head brand, market and corporate affairs at Standard Chartered Bank Nepal (SCBN).
Targeting the country’s mega automobile event, SCBN is offering auto loans at just 7.39 percent. The bank said it would provide an additional discount of 0.25 percent on the interest rate to customers who have a PAN card. “Besides, we have also reduced the processing charge and simplified the process to get auto loans for the convenience of our customers,” said Poudel.
Apart from low interest rates, the various schemes that banks have been providing during the NADA Auto Show and Dashain-Tihar have also stimulated sales of vehicles. Most of these banks have been financing up to 80 percent of the cost of the product. In addition, some of them have heavily reduced the processing charge while others including Machhapuchchhre Bank have completely waived the processing fee.
According to bankers, they have increased loans in the sector as investments in automobiles is short-term lending and there is relatively low risk. “Our schemes are mainly targeted at salaried persons and the loan repayment period is up to seven years at the maximum.”
Chandani Shrestha, business development manager at NIC Asia said they had observed a significant growth in demand for auto loans during the NADA Auto Show in the last few years.
“With the NADA show being more elegant for the people, demand for auto loans has surged almost twofold in the last four years,” said Shrestha, adding that NIC Asia had been working as part of the auto show for the last four years.
“It is a win-win situation for both the automobile dealers and banks regarding the business in this segment.” According to her, NIC Asia will be offering auto loans at 7.99 percent for the entire segment of private four-wheelers. To provide instant service to customers, the bank has planned to station an attendant at each of the stalls during the auto show.
NIC Asia said it would charge its customers only 1 percent service fee. In addition, it will provide free insurance. Besides, it will be launching its home banking offer during the mega event. “Under the scheme, customers who send an sms in the specified pattern can receive spot-based service from the bank,” she added.
Source: The Kathmandu Post
