The Hindu Business Line : Two-wheeler loans go scarce

Mumbai, Feb 17 Banks are going slow on lending for purchase of two-wheelers. Such lending has seen a decline of more than 15 per cent over the past year, said officials from banks which are active in this segment.

According to them, high rate of delinquency among customers and the recent norms on appointment of recovery agents have forced banks to go slow in the two-wheeler segment.

“Several banks have reported higher losses from their lending to these segments and we also decided to go slow on it,” said Mr Harpreet Singh, Business Director, Centurion Bank of Punjab.

Centurion Bank, which is a major player, has reduced lending for two-wheelers by almost 50 per cent during 2007-08.

Bankers say tighter recovery norms have given customers more scope for avoiding payments. “Banks are now required to provide the customer with the name and telephone number of agents appointed for the recovery. This has made things more difficult for banks as customers can now easily avoid taking calls,” said Mr Singh.

ICICI Bank, the largest player in the segment, said it has stopped lending for two-wheelers in more than 100 locations.

“We are present in around 700 locations for two-wheeler loans. In some markets, we have moved out of this segment. We looked at several factors including how the portfolio is behaving and whether it is feasible to recover money,” Mr Rajeev Sabharwal, Senior General Manager and head of Retail Assets, ICICI Bank, said.

The two-wheeler industry has seen sales fall by over 10 per cent over the past year and the financing market has seen a decline of about 15-20 per cent. “We are more or less in tandem with the industry trend,” Mr Sabharwal said.

Following RBI guidelines on appointment of recovery agents, Centurion Bank has tightened procedures and documentation in order to ensure safe recovery.

Another reason for the slowdown is the higher cost of living. Two-wheeler loans are the most affected by inflation and high costs, Mr Sabharwal said.

Sales dip

Two-wheeler manufacturers have already started feeling the heat. There is a 15 per cent dip in sales on account of the tightening of credit norms alone, according to Mr H.S. Goindi, Senior Vice-President, TVS Motor.

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