100 % leasing facility for motor vehicles available till Dec 1
View(s):Did the Central Bank bungle or was it a bona fide error? Confusion reigned earlier this week over a direction given by the Central Bank (CB) on maximum loan facility available for leasing vehicles.
A CB issued a directive on September 14 titled “Finance Leasing Act Direction No 01 of 2015” to specialised leasing companies said from September 15th, leasing companies can grant loans or advances not exceeding 70 per cent of the value of such vehicle known in technical terms as “loan to value ratio (LTV)”.
Since then finance and leasing companies have been providing leases based on this circular (at up to 70 per cent).However on October 29, the CB issued another directive this time under the Finance Business Act (Finance Business Act Direction No 2 of 2015) saying that the circular issued dated September 14 on the LTV “shall come into force with effect from December 1, 2015”.
Confused finance companies and motor car dealers seeking clarification from the CB on a ‘somewhat’ contradictory circular, were then told by the CB that between October 29 and December 1, the earlier rates which according to the trade was unlimited credit (100 per cent or over) would be in force for the lease purchase of a vehicle.
It was pointed out by the trade that though Finance Minister Ravi Karunanayake, in a media release on October 29, has announced that the leasing facility has been increased to 90 per cent with immediate effect, that was never made formal through a CB directive. “This means, despite Government concerns of unlimited growth in motor vehicle imports (and draining of foreign exchange), a new one month window has been opened for more vehicles to be imported,” a trader said, adding however that there were other restrictions on opening LCs and a complex valuation method.