In a move that has sparked debate, Nepal Rastra Bank (NRB) has tightened loan rules for electric vehicles (EVs) while easing financing for petrol and diesel vehicles.

Until now, banks could finance up to 80% of an EV’s price, making them more accessible to buyers. But with NRB’s new policy, that limit has been cut down to 60%, meaning higher upfront costs for EV buyers. On the other hand, the loan limit for petrol and diesel vehicles has been increased from 50% to 60%, making them easier to purchase.

This decision raises important questions:

• Why is Nepal making it harder to buy EVs while making petrol cars more accessible?
• What does this mean for consumers, the environment, and Nepal’s clean energy goals?

Let’s break it all down.

What Exactly Has Changed?

Before this policy, banks followed this structure for vehicle loans:

What This Means for Buyers

• EVs just became more expensive to finance. If you were considering a Tata Tiago XE EV (Rs 30 lakh), you previously needed a down payment of Rs 6 lakh, with the bank covering the remaining Rs 24 lakh. Now, with the reduced loan limit, you will have to make a down payment of Rs 12 lakh, meaning you need twice as much cash upfront.
• Petrol and diesel vehicles just became easier to buy. If you were looking at a Hyundai Creta (Rs 50 lakh), the required down payment was Rs 25 lakh, but now it has dropped to Rs 20 lakh, making fossil-fuel vehicles more accessible.

This shift removes the financial advantage EVs previously had, while making petrol and diesel cars a more attractive option for buyers.

Why Did NRB Introduce This Policy?

This policy shift has raised concerns about Nepal’s commitment to clean energy and sustainability, but NRB likely has several reasons for making this move:

1. Controlling Bank Liquidity

• EVs tend to be more expensive than petrol or diesel cars, meaning banks issue larger loans for EV buyers.
• By lowering the loan-to-value (LTV) ratio for EVs, NRB is likely trying to reduce overall loan sizes and manage liquidity in the banking sector.

2. Managing Nepal’s Foreign Currency Reserves

• Nepal imports all its vehicles, and EVs are mostly sourced from China and India.
• More EV sales mean higher foreign exchange spending, which puts pressure on Nepal’s foreign currency reserves.
• By making EVs harder to buy, NRB may be trying to slow down that outflow.

3. Reducing Loan Defaults

• As EV prices remain high, larger loans could lead to higher default risks for banks.
• By requiring larger down payments, NRB may be aiming to reduce banking risks and ensure only financially stable buyers take out EV loans.

4. Balancing the Automobile Market

• Previously, EVs had an edge over petrol and diesel vehicles due to easier loan access.
• Traditional car dealers may have pushed for equal financing terms, leading to this policy shift.

While these financial reasons are understandable, the policy raises concerns about Nepal’s environmental commitments.

How Will This Impact Nepal’s EV Market?

1. EV Sales Could Decline

• With higher upfront costs, fewer buyers may be able to afford an EV.
• Many middle-class buyers who could afford Rs 6 lakh as a down payment for an EV may now struggle to pay Rs 12 lakh.

2. Petrol and Diesel Vehicle Sales May Rise

• Since financing is now easier, more people might opt for traditional fuel cars over EVs.
• This could slow down Nepal’s transition to clean transportation.

3. Higher Pollution and Fuel Dependence

• Nepal has been working to reduce fuel imports and promote EV adoption.
• If more people buy petrol and diesel vehicles instead of EVs, Nepal will consume more fuel, leading to increased air pollution and reliance on imported petroleum.

4. The Automobile Market Could Shift Away from EVs

• Over the past few years, Nepal’s EV market was growing rapidly, with more brands entering the country.
• This policy could discourage automakers from focusing on EVs, leading to slower adoption of clean energy vehicles.

What Can Be Done to Support EV Adoption?

If Nepal wants to balance financial stability with environmental progress, there are a few solutions the government could consider:

• Introduce EV subsidies or tax incentives – Lowering taxes on EVs or offering rebates could offset the impact of stricter loan rules.
• Encourage local EV production – Developing a domestic EV manufacturing sector could reduce dependence on imports.
• Strengthen charging infrastructure – Expanding public EV charging stations would increase consumer confidence.
• Offer low-interest loans for EVs – Creating a special financing program for EVs could make them more accessible.

Without additional support, this policy could slow Nepal’s progress in transitioning to clean energy vehicles.

What Happens Next?

This decision has sparked debate among environmentalists, automakers, and consumers. Here are the possible outcomes:

1. The policy remains unchanged – EV sales decline, while fossil-fuel vehicle sales increase.
2. The government steps in – Environmental and transportation ministries could push NRB to reconsider.
3. New EV incentives are introduced – Tax cuts or subsidies could offset the impact of stricter loan rules.

For now, if you were planning to buy an EV, you will need more cash upfront, while traditional vehicle buyers will find it easier to get a loan.

Final Thoughts: A Step Back for EV Adoption?

At a time when the world is moving toward electric vehicles, Nepal’s decision to tighten EV loans while making petrol and diesel cars easier to buy seems like a step backward.

While NRB’s financial concerns are valid, this policy could slow Nepal’s progress toward clean energy and sustainability goals.

The big question remains: Should Nepal focus on short-term financial stability or long-term environmental benefits?

What Do You Think?

• Should Nepal reconsider its EV loan policies to encourage clean energy?
• Is this move necessary for financial stability, or does it slow down Nepal’s green future?

Let’s discuss.