HOUSING, AUTO LOANS DOMINATE CONSUMER
Owning a house and a car is no longer a distant
dream for an executive in Nepal. The boom in consumer finance in recent years is
attributed to changing consumption patterns of middle class people and their
increasing purchasing power.
Rapid urbanisation is what most of the commercial banks are cashing in on with
floating such products that help meet the need of people. House and vehicles
have become two important and viable sectors in which banks are investing money.
Recent figures show that the sale of automobiles recorded a two-digit growth in
the past five years and the real estate business, especially in urban areas, is
also doing much better. Competitive interest rates, alongwith over 70 per cent
of the total cost, is an offer that middle class people with stable earnings
find difficult to resist. However, the schemes or offers that different banks
are offering focus mainly only on two areas, housing and vehicles financing.
Unfavourable situation to invest in big projects like hydropower, infrastructure
and long-term development projects has led most commercial banks to find a safe
haven. And, retail lending is what most of commercial banks are finding safe.
The short-term investment sector with a minimum risk has been a great draw.
Everest Bank Ltd. (EBL) is one of the key players and also known for pioneering
consumer finance, as it introduced home loans in Nepal in 2001. Retail lending
by EBL stands at the third position with 20 per cent of the total loan
portfolio, following the investment in manufacturing sector of 35 per cent and
trading sector with 21 per cent. Keshab Raj Poudel, corporate credit manager of
EBL, said EBL provides house loan up to 80 per cent of total cost with 20 years
of repayment period at the interest rate of 8 to 9.5 cent per annum.
Car loan does not need any collateral as the car itself is registered in the
bankís name, however for educational loan, the customer has to keep 100 per cent
collateral equivalent to the sum of loan.
Though the Bank of Kathmandu (BOK) entered into consumer financing some four
years back, the bank has come up with a full spring on retail lending recently
with diversified products.
Recognizing the value of offering a wide range of services not only to the
corporate but also to individuals, BOK has been aggressively offering various
consumer loans, helping people realize their dreams, says Ajay Shrestha,
assistant general manager at BOK.
BOK consumer finance is focused on real estate and auto loan. Besides, the bank
also provides educational loan and loan for foreign employment.
According to him, vehicle loans hold 50 per cent and home loans have about 25
per cent of total consumer lending. More than 600 customers have benefited so
fat from various retail lending schemes from the bank.
Interest rates on vehicle loans vary from 7.5 per cent to 10.5 per cent, housing
loan is charged with 9.5 per cent interest per annum. The average loan size for
consumer finance is estimated to be Rs. 1.5 million.
Entry of the two largest public sector commercial banks Nepal Bank Ltd and
Rastriya Banijya Bank, in the consumer financing, has added steam to the banking
sector. Though these two banks have also joined the areas of house loan and
vehicle loan, their interest rates are competitive and less than other
Home loans by both these banks interest rate is 7.5 per cent, whereas auto loan
by NBL is at the annual interest rate of 6.5 per cent, which is 0.5 per cent
less than RBBís offer. These banks have also announced to offer educational
loans to deserving candidates.
Source: The Himalayan Times, March 29, 2005
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