5- pronged strategy
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He noted that vehicle importers will have to block large amounts of their money for the LCs till the landing of vehicles.
Earlier they had the facility of opening the LC with a part payment and the balance could be settled after the arrival of the vehicle, he added.
Tilak Gunasekara, Managing Director of Sathosa Motors Plc, said the new margin facility should apply only for cars, not for commercial vehicles and buses.He said transport and logistics sector is important for the Sri Lankan economy as it impacts on the country’s transportation of agricultural produce from the fields to retail shops.
On leasing facility constraints, the CB imposed limits on banks and finance companies in which loans and leases of vehicles should not excess 70 per cent of the value of the vehicle compared to 100 per cent earlier.
This was welcomed by Rajiv Gunawardena, Chief Executive Officer, Asia Asset Finance Plc, who said the move would have a positive impact on the finance industry as well as on the overall economy.
He noted that it will mainly affect first-time buyers and those who are looking for their second vehicle. It should not have an impact on those replacing their vehicles.
Leasing and hire purchase loans of motor vehicles have been one of the biggest product portfolios for the finance industry; therefore in terms of business activity there will be an immediate impact until the market adjusts for the change.
However this will help to improve the quality of the vehicle loan portfolio in the longer term, he pointed out.
Abans Finance Plc Managing Director Kithsiri Wanigasekera was of the view that this move could restrain future credit growth of Sri Lankan leasing and finance companies and also reduce bad loans and defaulters.
He noted that most of the finance companies are not allowing 100 per cent vehicle leasing facilities, therefore its impact will not threaten the industry.