Nepal Rastra Bank’s New Policy May Discourage EV Buyers

The Nepal Rastra Bank (NRB) has introduced policy changes that make it more challenging for consumers to access bank loans for purchasing electric vehicles (EVs).

By reducing the loan-to-value (LTV) ratio for EV financing, the central bank has effectively increased the upfront financial burden on buyers, potentially discouraging EV adoption in the country.

On Tuesday, during the mid-term review of the monetary policy for the current fiscal year, the NRB announced a significant reduction in the LTV ratio for electric vehicles, lowering it from 80% to 60%. This means that while banks and financial institutions previously covered up to 80% of the cost of an EV through loans, they will now finance only 60%, requiring buyers to pay the remaining 40% out of pocket.

Interestingly, while restrictions have tightened for EVs, the NRB has eased financing for petrol and diesel-powered personal vehicles. The LTV ratio for these vehicles, which was previously set at 50%, has now been raised to 60%, aligning it with the revised EV financing limit. This adjustment allows buyers of conventional fuel-powered vehicles to secure a higher percentage of bank financing, making them more accessible compared to previous conditions.

With these changes, EV buyers will need to arrange a significantly larger portion of the vehicle's price themselves, making electric cars less financially attractive. Until now, EV loans have been more favourable, covering a substantial part of the cost, which played a key role in boosting the adoption of electric mobility. However, by lowering the LTV ratio, the new policy might slow down the momentum of EV sales in Nepal.

Given the global shift toward cleaner transportation and Nepal’s efforts to promote sustainable mobility, this decision could have a long-term impact on the EV market. By reducing financial incentives for EV buyers while simultaneously easing financing for fossil-fuel-powered vehicles, the NRB’s policy shift may influence consumer preferences, potentially hindering the country’s progress toward greener transportation.