CB directs banks to reduce down payments on mini trucks to stimulate economy

The Central Bank has reduced the down payments required to obtain the financing facilities to purchase light trucks, single cabs and other similar vehicles, Mirror Business learns.

To this end, the Central Bank has issued a fresh circular, amending the circular issued early this year, directing the banks to provide the financing facility up to 70 percent of the value of those vehicles, an increase from the previous 50 percent.

In other words, a potential buyer of a light truck or a single cab that falls under the ‘B’ category classified by the Depart of Motor Traffic (DMT) will now have to place a down payment of only 30 percent as opposed to the earlier required 50 percent of the value of the vehicle.

The other categories of vehicles, which fall under this new loan-tovalue (LTV) rule, also include ‘A1’ and ‘A’, according to the DMT categorization of motor vehicle classes.

Earlier this year, the Central Bank imposed a 50 percent LTV for motor cars and all other categories of vehicles, 25 percent LTV for three-wheelers and 90 percent LTV for commercial vehicles in a bid to restrain an influx of vehicle imports causing economic and social woes.

The amendment to the original rule appears to have been carried out to ease the financing conditions for vehicle categories that assist small businesses and the rural economy.

An integral capital input for a micro enterprise is a basic utilitarian vehicle such as a threewheeler and/or a mini lorry (batta).

Recently Murtaza Jafferjee, an economist, criticized the government’s vehicle taxation policy and higher down payments as they are detrimental towards greater inclusive development and impedes higher economic efficiency.