BB raises auto loan limits to promote green vehicles

Bangladesh Bank has expanded consumer financing limits allowing banks to offer higher auto and personal loans in a move aimed at supporting rising consumer demand and encouraging the use of environmentally friendly vehicles in the country.

In a notification issued on Tuesday, the central bank said all scheduled banks can now provide auto loans of up to Tk 8.0 million for purchasing electric and hybrid vehicles, up from the previous ceiling of Tk 6.0 million for conventional automobiles.

The central bank also eased  equity requirements for green vehicles and raised the personal loan limits in response to increasing prices of consumer goods.

"The demand and usage of electric and hybrid vehicles are steadily increasing in the country because of their eco-friendly and energy-efficient characteristics," the central bank said.

Under the revised rules, auto loans will be offered at a maximum debt-to-equity ratio of 60:40. However, for hybrid and electric vehicles, the ratio has been relaxed to 80:20 from the previous 70:30.

Explaining the rationale, the central bank noted that the consumer product market in Bangladesh has expanded rapidly over the last few years, driven by rising per capita income and steady economic growth.

"Considering the existing market price and the increasing demand for consumer goods, it has been decided to make changes in Regulation-30 of Prudential Regulations for Consumer Financing," it said.

Under the revised regulation, the limit for unsecured personal loans has been doubled to Tk 1.0 million from Tk 0.50 million, while the ceiling for secured personal loans has been raised to a maximum of Tk 4.0 million from Tk 2.0 million.

Besides, banks have been instructed to ensure that "in any case, the growth rate in total loans under 'Consumer Financing' must not exceed the growth rate of the bank's total loans."

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