Bangladesh Bank has increased the limit of personal car loans to encourage the development of the domestic car industry and the use of environmentally friendly vehicles.
At the same time, the maximum tenor of personal loans has also been increased. A circular letter in this regard was issued on Thursday (June 25) and instructions were sent to the managing directors and chief executives of all scheduled banks in the country.
According to the circular issued by the Banking Regulation and Policy Department (BRPD) of Bangladesh Bank, a customer could previously take a car loan up to a maximum of Tk60 lakh. However, the loan limit has been increased to Tk80 lakh for the purchase of electric, hybrid and domestically produced cars.
In addition, in the case of general car loans, the ratio of loan and customer's own investment (debt-equity ratio) has been kept at a maximum of 60:40.
That is, up to 60% of the car's value can be borrowed and the remaining 40% will have to be invested by the customer himself.
However, in the case of electric, hybrid and domestically produced cars, this ratio will be 80:20. As a result, customers will get loan facilities by investing comparatively less of their own money in buying these cars.
The central bank said that in determining the total loan amount of an individual, car loans taken in the name of dependent family members will also be considered as part of the same exposure.
Meanwhile, the maximum tenure of personal loans and loans taken for the purchase of consumer goods (personal loans and consumer durables loans) has been increased to 8 years. Earlier, the tenure of such loans was comparatively short.
In another important decision, Bangladesh Bank has withdrawn the restriction that the growth of consumer loans cannot be higher than the total loan growth of a bank.
This restriction, which was in a circular of 2017 and a directive issued in May this year, has been canceled with immediate effect.
Bangladesh Bank said that this directive has been issued under the powers conferred by Section 45 of the Bank Companies Act, 1991 and it will come into effect immediately.
Those concerned believe that this new policy will increase investment in the domestic automobile industry, encourage the use of electric and hybrid vehicles, and create new momentum in the consumer credit market.