Festive auto loan offers for the taking
KATHMANDU, SEP 21 -
In a bid to cash in on the Dashain buying frenzy, commercial banks have started to roll out new auto loan schemes.
Himalayan Bank Limited (HBL) recently launched an auto-loan product with fixed interest rate and HBL officials say the response so far as been ‘amazing’. The bank is offering a fixed interest rate of 10.6 percent on two-year auto financing, while the rate will be floating on loans with payback period of over two years. “People are skeptic about fluctuating interest rates, and our idea behind introducing this product is to make them comfortable,” said HBL CEO Ashoke Rana.
Standard Chartered Bank (SCB) Nepal, the pioneer in consumer financing, is offering car loans at 9.9 percent interest. According to SCB’s corporate affairs head Diwakar Poudel, automobile sales start increasing during the Dashain festival and peak during the winter. “Excess liquidity in the banking system has already forced banks to slash interest rates, and the upcoming festive season has further motivated them to cut the rates,” said Poudel.
Similarly, NIC Bank has launched two new innovative auto loan products — Pre-approved Auto Loan and Auto Balloon Financing. NIC CEO Sashin Joshi said financing personal vehicles to professionals with regular cash flow is not so risky. “Since the default rate in such loans is only around 1 percent, automobile financing accounts for around 10 percent of NIC’s total loan portfolio,” said Joshi.
Mega Bank Nepal has even placed its stall at the ongoing NADA Auto Show and is offering ‘on the spot’ auto financing. Although older banks are frontrunner in reducing interest rates, new banks facing higher cost of fund are reluctant to get into the ‘interest rate war’. “We cannot offer rates equal to those being advertised by some banks,” said Commerz and Trust Bank CEO Anal Bhattarai. “Therefore, we have not launched special packages for auto loan.”
Commerz and Trust charges 12 percent interest on auto financing. “When you charge 12 percent while other players are offering around 10 percent, you might not get quality borrowers. Most of the borrower coming to us might be the one rejected by others,” added Bhattarai. “So we are little skeptic about auto financing.”
According to Saurav Jyoti, president of Nepal Automobile Dealers Association (NADA), a significant fall in interest rates and in increase in bank and financial institutions’ exposure to the automobile sector has helped the industry survive. “When the domestic automobile market was struggling for survival, financial sectors’ inclination towards the auto sector was a big respite,” he said.
Source: The Kathmandu Post
