Banks Increase Hire Purchase Loans amid Falling Interest Rates

Commercial banks have increased their lending under the hire purchase category, primarily for vehicle purchases. According to Nepal Rastra Bank (NRB), banks increased hire purchase lending by around 7 percent as of mid-June of the last fiscal year (FY 2024/25), compared to the same period in the previous fiscal year.

During the first 11 months of fiscal year 2023/24, banks had disbursed over Rs 107.58 billion in hire purchase loans. This figure rose to more than Rs 114.95 billion in the corresponding period of FY 2024/25, reflecting a notable growth in lending under this category.

The central bank recently adopted a more flexible stance on hire purchase loans. NRB reduced the risk weight for auto loans from 150 percent to 100 percent, encouraging banks to prioritize this segment. With adequate investable capital, banks have started offering such loans at lower interest rates.

Banks are now offering auto loans with premiums ranging from 0.25 to 5 percentage points above the base rate. The trend is also being driven by the ongoing and upcoming automobile exhibitions and festive seasons, said Devendraraman Khanal, CEO of Rastriya Banijya Bank. “With interest rates declining, customers’ interest in auto loans is increasing,” he added.

Base rates of banks have also dropped significantly, making loans cheaper. For the first month (mid-July to mid-August) of the current fiscal year, Standard Chartered Bank had the lowest base rate among commercial banks at 4.9 percent. The average base rate across commercial banks has fallen to 6.1 percent.

Bankers also say growing consumer interest in electric vehicles has contributed to the rise in hire purchase lending.

Which Banks Increased Their Investment?

As of mid-June 2025, 10 out of the 20 commercial banks had increased their hire purchase lending. These include Global IME Bank, Nabil Bank, Rastriya Banijya Bank, Everest Bank, Sanima Bank, NMB Bank, Prime Commercial Bank, and Agricultural Development Bank.

Among them, Everest Bank recorded the highest increase in hire purchase lending. The bank increased its investment by more than Rs 4.21 billion during the review period. It had disbursed over Rs 3.48 billion as of mid-June 2023, which rose to more than Rs 7.69 billion by the same period in 2024.

On the other hand, Prime Commercial Bank recorded the smallest growth, with an increase of just over Rs 1.7 million.

Global IME Bank leads in overall hire purchase lending, having invested more than Rs 15.68 billion during the review period. Nabil Bank stands second in terms of total disbursement.

Meanwhile, 10 banks reduced their lending under the hire purchase category during the same period. These include Himalayan Bank, Prabhu Bank, Nepal Investment Mega Bank, Kumari Bank, Citizens Bank, NIC Asia Bank, and Standard Chartered Bank.

Among them, Kumari Bank reduced its hire purchase lending the most, cutting back by more than Rs 1.86 billion compared to mid-June of the previous fiscal year.