The Hindu Business Line : PSU banks aim for aggressive passenger vehicle loan growth

Despite the economic slowdown, the major public sector banks expect loans for purchase of cars and other passenger vehicles to grow 20-25 per cent in the current fiscal.

However, their private sector rivals have become more conservative in lending to the auto sector and expect a much lower growth.

The main reason is that PSU banks are charging lower interest rates on car finance than the private sector banks. While the lending rates of the public sector banks range from 11.75 to 13.75 per cent, private sector banks charge 15 per cent and above.

A State Bank of India official said: “We are growing our portfolio faster than the average market growth rate.”

SBI has recorded a robust 30 per cent year-on-year growth in its auto loan portfolio. The bank had an outstanding auto loan portfolio of Rs 8,029 crore as on September 30, 2008 as against Rs 6,153 crore as on September 30, 2007.

Union Bank of India, another PSU bank, too has logged around 25 per cent year-on-year growth in its auto loan. “Unlike some banks, which resort to direct sales agents to garner business, we prefer dealing with customers directly through dealers. This way we have control over the customer profile,” said a senior bank official.

The bank has an auto loan portfolio of around Rs 1,000 crore.

However, the largest private sector bank ICICI Bank does not expect much growth in auto loans in the current year.

“Primary demand in the four-wheeler segment is coming down. The ratio of actual sales to purchase enquiries is coming down,” said Mr N.R. Narayanan, Head of Vehicles Business, ICICI Bank.

In the next six months, the car loan market may witness a de-growth. “By March 2009, I see a flat to negative growth,” said the ICICI official.

Mr Mayank Pareek, Executive Officer, Marketing & Sales, Maruti Suzuki Ltd, said “private sector banks such as ICICI Bank and HDFC Bank, which were aggressive players in auto finance three-four years ago, have noticeably scaled down their lending from the beginning of this year.

“ICICI Bank’s share of financing our vehicles dropped to five per cent now from 35-40 per cent earlier. We anticipated it and entered into agreements with PSU banks. Two years back, we tied up with SBI and associate banks, and now we are building on that and also the tie-ups with other PSU banks.”

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