The Hindu Business Line : PSBs step in ‘cautiously’ as pvt banks trim vehicle lending

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PSBs step in ‘cautiously’ as pvt banks trim vehicle lending

Shobha Kannan

Kolkata, Oct. 12 Public sector banks are planning to increase their vehicle finance portfolio in a ‘cautiously aggressive’ manner in order to fill the vacuum left by some private banks that have trimmed their exposure in this area, say senior bank officials, car dealers and industry experts.

With rising interest rates and delinquency levels, private banks, which were initially aggressive in the vehicle finance portfolio, are now taking a cautious approach. This has affected genuine car buyers, senior bank officials pointed out.

“Some private banks have decided to reduce their exposure to vehicle finance and we are trying to capitalise on this. However, we will adopt a ‘cautious but aggressive’ policy in order to ensure that we do not burn our fingers,” said Mr T.M. Bhasin, Executive Director, United Bank of India.

Festive season buying

UBI plans to focus on vehicle finance in a big way during this festive season, Mr Bhasin told Business Line. “We are focusing on customers who have a salary-linked account with our bank. This will ensure that the loan extended is secure,” he said.

Allahabad Bank plans to grow its car loan portfolio by 20 per cent in 2008-09, said a senior official at the bank. “There is a greater thrust on vehicle finance and we are looking at tying up with manufacturers,” he said. The bank’s total vehicle finance portfolio stands at Rs 300 crore as on September 2008, he added.

A senior official at State Bank of India, however, maintained that the bank was one of the large players in the segment and its portfolio increase had little to do with the reduced exposure of private banks.

“We have been doing well in vehicle finance. Both our products and delivery system are moving down well with our customers,” said the official who did not wish to be identified.

SBI, he pointed out, finances approximately one lakh cars each year and plans to grow this by 33 per cent in 2008-09.

Maruti, banks tie up

A senior official at Maruti Suzuki said: “Public sector banks have a wider reach and a long association with their customers. They therefore have the track record of their customers. This makes it easier to lend and also ensure that the customer does not default on his payments. Moreover, private banks lack transparency and have a multiple interest-rate structure which acts as a deterrent for some customers,” he added.

Maruti Suzuki, he said, has had a longstanding tie-up with SBI.

It has also tied up with SBI subsidiaries and plans to tie up with Punjab National Bank, he added.

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