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Car Loan: NBFCs lose automotive mortgage market share on charge conflict by PSBs

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(This story initially appeared in on Nov 17, 2020)

CHENNAI: NBFCs are dropping market share to banks in automotive and SUV financing and are shifting their focus to used automobiles, two-wheelers and business automobiles as an alternative. A mixture of capital constraints amongst NBFCs and renewed aggression from public sector banks (PSBs) has led to this example, stated auto financiers. In a bid to develop their retail portfolio, PSU banks are providing auto loans at 7.25% to 7.7% in comparison with NBFCs whose charges vary from 8.75% to 11%.

While State Bank of India (SBI) is providing auto loans ranging from 7.7%, others are even cheaper with Central Bank of India providing loans at 7.25%, adopted by Canara Bank (7.3%), United Bank of India (7.4%) and Indian Overseas Bank (7.55%).

“In recent times, NBFCs have lost market share to PSU banks, which have become more aggressive and that includes Tata Motor Finance,” stated Tata Motors group CFO P B Balaji. Unlike banks, NBFCs depend on wholesale funds. Banks are actually going sluggish in lending to finance corporations with RBI encouraging banks to take the co-lending mannequin to benefit from NBFCs’ community.

According to M Ramaswamy, chief monetary officer at Sundaram Finance, banks are flush with liquidity and might carry down charges. “We are facing pressure in some markets, depending on how aggressive they turn. It is a mixed bag for us — we mostly cater to individuals with higher risk profiles and because of our good ratings, our cost of funds has also come down. So, in certain regions, we have lost market share and in others, we have gained,” he stated.

Sundaram Finance noticed a 20% hole in mortgage disbursements within the September-ended quarter, 2020. Cholamandalam Investment & Finance Company (CIFC) noticed whole disbursements decline by 30% year-on-year in its car finance section for the quarter-ended September 2020, in line with analysis reviews of brokerage agency Motilal Oswal. This excludes the tractor and building gear (CE) segments.

Shriram Transport Finance disbursed ₹650 crore of loans, which was half of final yr. Also, 97% of disbursements have been within the used car section. “Our focus is on individual and small truck owners who prefer to buy used vehicles. Normally, banks do not lend to used vehicles because it is time-consuming, requires vehicle valuation and ownership transfer paperwork,” stated Umesh Revankar, MD & CEO, Shriram Transport Finance.

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