Nepal Rastra Bank (NRB) has tightened the noose against credit flow on electric vehicles (EVs) by hire purchase companies.

By amending the policy and procedural provisions on approval for hire and purchase companies on Monday, the central bank has asked the hire purchase companies also to reduce the loan to value ratio on the EVs to 60 percent from earlier 80 percent. As of now, the central bank has made this rule mandatory only for banks and financial institutions (BFIs).

Hire purchase is a non-banking finance company that enables businesses to purchase new assets on an installment plan. In Nepal, the companies providing this service have been facilitating their customers to purchase vehicles, machines and equipment, among others.

As of now, the NRB has licensed over a dozen of companies to carry out the function of hire-purchase. The companies offering the service must have a minimum paid-up capital of Rs 300 million.

Through its half yearly review of the monetary policy for the current fiscal year in February, the NRB reduced the loan-to-value ratio of EVs by 20 percentage points while taking lenient policy for fossil-fuel run vehicles. The central bank had raised the threshold for petroleum cars by 10 percentage points to 60 percent, making it similar to the provision for EVs.

At a time when the private sector has been criticizing the NRB for its unfair policy for environment-friendly automobiles, the central bank has further tightened its policy in the segment. In the new provision, potential buyers now have to make a down payment of 40 percent of total valuation of EV cars. Earlier, the mandatory down payment was only 20 percent.

According to an NRB official, the new provision has been introduced after hire purchase companies were found not abiding with the central bank’s revised policy. “Hire purchase companies had been providing loans up to 80 percent of the valuation of EVs even after the review of the monetary policy,” said the source.

Akash Golchha, senior vice president of NADA Automobiles Association of Nepal, expressed his dissatisfaction over the central bank’s policy. “The new credit system will discourage the use of electric vehicles,” he said.