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Bank hard-sell & cheaper loans drive auto financing

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(This story initially appeared in on Jan 11, 2021)

Chennai: Cheaper loans, aggressive choices from public sector banks and a common reluctance to make use of money for vehicles has led to a rise in auto financing penetration in passenger automobiles from 75% in the beginning of 2020 to round 80% now.

Auto financiers and sellers say the present buzz is led by the aggression of PSU lenders, that are providing charges decrease than non-public financiers. However the uptick is restricted solely to passenger automobiles and never two-wheelers and business automobiles.

ICICI Bank head (secured property) Ravi Narayanan mentioned: “In addition to various favourable macroeconomic factors, the all-time low interest rate is the key element for increased penetration of car finance as it boosts the sale of passenger cars. Additionally, there is a significant rise in demand for used cars for personal mobility. This too is leading to more customers opting for vehicle finance.”

Credit score company Icra’s sector head for monetary sector scores, A M Karthik, mentioned there was a median drop by 100-120bps (100bps = 1 share level) in automobile mortgage lending charges between January and December 2020. And prospects will not be solely getting cheaper loans however higher service as properly.

Icra VP Ashish Modani mentioned: “Car financing penetration has improved in the last two quarters across OEMs (original equipment manufacturers) and turnaround time has improved plus rejection rates have come down.”

PSU banks, that are providing automobile loans at sub-8% proper now, have seen a pointy rise of their mortgage books.

Indian Bank noticed a 90% enhance in car loans sanctioned within the third quarter in comparison with the primary half of this fiscal. The soar occurred in October with 40% of automobiles financed in mid-segment with common mortgage quantity being greater than Rs 5 lakh.

Mahindra & Mahindra supplier JS 4Wheel Motor’s Nikunj Sanghi mentioned: “In passenger vehicles, PSU banks now have around 17% share of the market, up from 4-5% before because they are cheaper than NBFCs and offer longer tenure loans.”

NBFCs for his or her half say they’re engaged on decreasing the curiosity hole with banks. Sundaram Finance nationwide head (auto) N Ramachandran mentioned: “Though there is a 2-3% differential between banks and NBFCs on rates we have worked hard to offer options, which are around half percentage points higher than banks.” As for the money element, that’s excessive amongst first-time consumers, he added.

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