The central bank has doubled the ceiling for car loans to reflect the increased prices of motor vehicles and provide banks a channel to utilise their excess liquidity.
Banks can now extend up to Tk 40 lakh as car loan, Bangladesh Bank said in a notice yesterday. The previous ceiling for car loans was Tk 20 lakh.
The debt-equity ratio has also been changed to 50:50 from 30:70 earlier. In other words, consumers can now buy cars worth up to Tk 80 lakh by availing a Tk 40 lakh bank loan. Previously, cars worth up to Tk 67 lakh could be purchased by taking out a bank loan.
The move comes in response to the higher market prices and demand for vehicles, said Md Anwarul Islam, deputy general manager of the central bank.
Another BB official said the relaxation of the car loan policy arose from the need to give banks a channel to direct their huge piles of liquidity in the face of sluggish investment demand.
At the end of May, banks were sitting on Tk 140,243 crore of excess liquidity, up from Tk 79,441 crore at the end of June last year.
The increase in car loan ceiling will not affect inflation, as the product is generally consumed by the society's high-income group, Islam added.

Meanwhile, Abdul Haque, a former president of the Bangladesh Association of Reconditioned Vehicle Importers and Dealers Association (BARVIDA), welcomed the central bank move, as the previous loan policy was “too tough” for the general public.
The new policy will be beneficial for small businessmen who until now could not afford the high cash requirement to purchase a car or utility van, he said.
Haque, however, called for further relaxation of the policy.
The ceiling for auto loan under consumer financing was first fixed in 2004 at Tk 50 lakh; loans could be availed after a 10 percent down payment.
Then in 2005 it was lowered to Tk 20 lakh, to be raised back to Tk 50 lakh in 2010. The debt-equity ratio then was fixed at 50:50.
In 2012, as part of BB's efforts to discourage loans to unproductive sectors, the ceiling was again lowered to Tk 20 lakh and the debt-equity ration set at 30:70.
The new policy will be of particular benefit to the low-income group, according to Hamid Sharif, former secretary general of BARVIDA.
“The previous policy was to arrange for 70 percent of the price of the car and fill in the remaining 30 percent by taking a bank loan, which was beyond them,” he added.
Last year, a total of 10,472 cars, 2,537 microbuses and 945 sports utility vehicles (SUVs) were sold, according to Haque. Between January and March this year, 3,624 cars, 946 microbuses and 355 SUVs were sold.