CB’S LTV tweaking unlikely to lift electric vehicle market

Despite the Central Bank last week issuing directives to the banks and finance companies to significantly lift the restrictions on leasing on electric motor vehicles to align with the environmentalist spirit of the 2018 budget, the stakeholders were of the view that this would not lead to a boom in the electric vehicle market without further adjustments.

The maximum loan-to-value ratio (LTV) for electric commercial vehicles, cars, SUVS, vans, threewheelers and any other electric vehicle are now 90 percent of market value, if the vehicles are unregistered or have only been in use in Sri Lanka for less than one year, after the first registration.

The budget speech had only included this new LTV ratio for electric busses and three-wheelers, as well as domestically assembled threewheelers, cars and buses. The Central Bank has not set such a restriction.

Further, the Central Bank has also introduced a 70 percent LTV ratio for hybrid cars, SUVS and vans, which too was not proposed in the budget.

For non-electric or hybrid vehicles, the older LTV ratios imposed in January 2017 still stand, with a 90 percent LTV for commercial vehicles, a 50 percent LTV for cars, SUVS and vans, a 25 percent LTV for threewheelers and a 70 percent LTV for other vehicles.

Meanwhile, for registered vehicles, which have been used for more than one year after the first registration, a maximum LTV of 70 percent was maintained by the Central Bank.

“The limits will not be applicable to credit facilities granted to any company engaged in tourism and/ or transportation for purchase of vehicle fleets to be utilized for their core business operations, provided that such vehicles financed will not be transferred to any person or entity within one year from the date of the first registration,” the Central Bank said.

For these exempted purposes, the banks and finance companies are required to place internal limits and risk management strategies, the Central Bank directed.