NADA's Policy Proposals to Nepal Rastra Bank Ahead of the Upcoming Monetary Policy

The NADA Automobiles Association of Nepal (NADA) has suggested various recommendations to Nepal Rastra Bank in light of the upcoming monetary policy.

The automobile sector makes a significant contribution to Nepal's GDP. It directly or indirectly employs thousands of Nepalis, playing a crucial role in national development. However, due to economic slowdowns in the automobile sector and the absence of supportive policies, the entire sector is currently facing a crisis, witnessing a 68% decline in the overall automobile market. Presently, this sector contributes only 14% to the GDP, whereas it once contributed up to 21%.

According to Karan Chaudhary, President of the NADA Automobiles Association of Nepal, "There is an urgent need for friendly policies in the automobile sector. While there are commendable incentives for electric vehicles at the policy level, the automobile sector needs policies that encompass not just electric vehicles but also integrate all aspects such as ICE vehicles, parts, lubricants, and tyres. Hence, there is a necessity for policies that benefit all these businesses."

NADA has presented timely suggestions to the Nepal Rastra Bank to transform Nepal's sluggish automobile business into a dynamic one. The recommendations made to the Nepal Rastra Bank are as follows:

1. Increase the Loan to Value Ratio from 50% to 75% for Hire Purchase loans for vehicles running on petrol and diesel.
2. After the implementation of the current loan guidance directive 2079, various steps have been taken by the Nepal Rastra Bank in the implementation of the current loan guidance directive. However, it is still causing problems for businessmen. Hence, it is advised to implement this directive only for those who have taken loans after the issuance of this directive.
3. Since blacklisted individuals continue their operations through other banks and face lenient actions, Nepal Rashtra Bank must enforce this rule rigorously.
4. Nepal Rastra Bank needs to differentiate between privately used vehicles and commercially significant ones powered by petrol, diesel, and electric, adjusting bank investments accordingly. Moreover, sectors with an NPA of 55 should not receive financing.
5. Household income, typically utilized by its members such as couples, should factor into calculating the repayment capacity of auto loan borrowers. Therefore, for real estate purchases, the Debt Service to Gross Income Ratio should be simplified and maintained at 70 percent, up from the current 50 percent, based on payment verification.
6. Nepal Rastra Bank must categorize ICE vehicles based on private and commercial categories.