Banks raise loan ceiling to Tk 8m for electric cars, personal loan cap doubled
Customers will now be able to take loans of up to Tk 8 million (80 lakh) to purchase electric and hybrid vehicles.
At the same time, the ceiling for personal loans to buy cars has also been increased, with individuals now eligible for up to Tk 4 million (40 lakh).
Bangladesh Bank set these new limits in a directive issued today, Tuesday outlining how much banks can lend for environmentally friendly vehicles and personal loans.
The demand for and use of electric and hybrid vehicles have been steadily increasing in the country due to their environmentally friendly and cost-efficient features. In the context of the recent energy crisis, demand for such vehicles is expected to rise further.
The decision has been taken also considering the market price of vehicles and to encourage customers to purchase electric and hybrid cars.
Vehicle loans up to Tk 8 million
According to the Bangladesh Bank circular, the loan limit for vehicles other than electric and hybrid models has been set at a maximum of Tk 6 million (60 lakh), including insurance.
For electric and hybrid vehicles, banks will be able to provide auto loans of up to Tk 8 million (80 lakh) to a single customer. If auto loans are taken by dependants of an individual, those will be counted as part of that person’s total loan exposure.
Bangladesh Bank has also stated that auto loans must be provided at a maximum loan-to-equity ratio of 60:40. However, for hybrid or electric vehicles, financing can be extended at a ratio of up to 80:20.
This means that for a vehicle priced at Tk 10 million (1 crore), a bank can provide a loan of Tk 6 million (60 lakh), while the customer must pay the remaining Tk 4 million (40 lakh). In contrast, for a hybrid or electric vehicle of the same price, the bank can provide Tk 8 million (80 lakh), with the customer contributing Tk 2 million (20 lakh).
Arup Haider, deputy managing director of City Bank, told Prothom Alo that a request had been made to increase loan limits in view of inflation and rising vehicle prices.
He said the enhanced limit for electric vehicles has been introduced with environmental considerations in mind, which is expected to boost financing for eco-friendly cars and have a positive impact on the environment.
Personal loan limits increased too
The Bangladesh Bank circular noted that the consumer goods market in Bangladesh has expanded rapidly in recent years. Rising per capita income, alongside GDP growth, has increased consumers’ purchasing capacity.
Taking into account current market prices and growing demand for consumer goods, changes have also been made to consumer loans.
Banks will now be able to provide personal loans of up to Tk 4 million (40 lakh). However, loans issued against bank deposits will be exempt from this limit. Previously, banks could lend up to Tk 2 million (20 lakh).
The circular also stated that banks must ensure consumer financing does not, under any circumstances, exceed the overall growth rate of total loans.