Vehicle Import Becomes Costly; 50% Margin Now Compulsory To Open LC; Prices To Increase; EVs Receive An Exemption

As per the new directive issued by the Nepal Rastra Bank (NRB), automobile importers in the country now have to maintain a 50 percent margin when opening the letter of credit (LC). Earlier, importers were allowed to keep a margin of 1 percent only. This amendment by Nepal Rastra Bank is going to increase the price of vehicles and motorcycles in the market. However, this does not apply to electric vehicles and imports from government agencies, diplomatic missions and hospitals.The provision of opening the LC  with a margin of 50 percent of the vehicle price will create a situation for importers to raise money in advance to import goods. Banks will not be allowed to pay interest on such margin amounts. Similarly, no bank will be allowed to disburse loans (in domestic currency) for the purpose of depositing margin amounts. Banks will now have to collect margin amounts from the importer at the time of opening the LC. When paying the import amount, such margin will be paid from the amount. Keeping 50 percent of the value in the margin will lead to high-interest costs, therefore, increasing the price of cars and motorcycles.Until now, it was easier for automobile importers as banks would facilitate and give loans for opening LCs. But now, the new system will be a financial burden for automobile importers.