Auto Credit: Hard-to-Sell, Cheaper Bank Loans Boost Auto Finance | India Business News

CHENNAI: Cheaper loans, aggressive options from public sector banks and a general reluctance to use cash for cars led to an increase in the penetration of auto finance in passenger vehicles by 75% at the start from 2020 to around 80% now.
Financiers and auto dealers say the current buzz is driven by aggression against PSU lenders, who offer lower rates than private financiers. However, the increase is limited only to passenger vehicles and not to two-wheelers and commercial vehicles.
ICICI Bank Manager (Assets Guaranteed) Ravi Narayanan said, “In addition to various favorable macroeconomic factors, the historically low interest rate is the key element for increased penetration of auto finance as it stimulates the sale of cars. particular. In addition, there is a significant increase in the demand for used cars for personal mobility. It is also leading more and more customers to opt for auto financing. ”
AM Karthik, head of the financial sector ratings sector at rating agency Icra, said there had been an average 100 to 120 basis point (100 basis point = 1 percentage point) drop in rates auto loans between January and December 2020. And customers aren’t just getting cheaper. loans but also better service.
Icra Vice President Ashish Modani said: “Auto finance penetration has improved over the past two quarters among OEMs (original equipment manufacturers) and lead times have increased. are improved and rejection rates have decreased.
PSU banks, which currently offer auto loans at less than 8%, have seen their loan portfolios increase sharply.
Indian Bank recorded a 90% increase in sanctioned auto loans in the third quarter compared to the first half of this fiscal year. The jump occurred in October with 40% of vehicles financed in the middle segment, with the average loan amount exceeding Rs 5 lakh.
Nikunj Sanghi, Mahindra & Mahindra JS 4Wheel Motor dealer, said: “In passenger vehicles, PSU banks now have around 17% of the market, up from 4-5% previously, as they are cheaper than NBFCs and offer longer term loans.
The NBFCs say they are working to reduce the interest differential with the banks. Sundaram Finance (auto) country manager N Ramachandran said: “Although there is a 2-3% spread between banks and NBFCs on rates, we have worked hard to offer options, which are about a half a percentage point higher than the banks. ” As for the cash component, it is high among first-time buyers, he added.

Bernadine J. Perkins