The Hindu Business Line : Public sector banks on fast track now

New Delhi, Dec. 3 It’s a reversal of roles. Public sector banks now have more customers knocking on their doors for auto loans than private banks, which were leading the race earlier.

The reason: public sector banks have started sanctioning auto loans at the same speed that private banks used to -- two to three days – and are offering lower interest rates as well.

The public sector banks’ change of heart seems to have come about from the huge opportunity they see as private banks go increasingly stringent in financing vehicles due to the global meltdown.

Take for instance Mr Wilfred Minz, a supervisor at Life Insurance Corporation who was out scouting to finance his Alto. He preferred to approach the State Bank of Patiala that offered him an interest rate of 12.25 per cent, while private banks rates start from 13 per cent and go as high as 18-19 per cent. Besides, it was sanctioned on a fast track. “My experience has been that despite the extensive documentation they need (public sector banks), I did not have to run around and my loan got sanctioned in just two days,” recounts Mr Minz.

Similarly, Mr Ramesh Khanna, a marketing manager, who bought a Ford Ikon last month from State Bank of India was taken aback with the public sector bank’s promptness of service.

“It was hassle-free. I could not believe that a SBI official would come even at 9 p.m. to verify my documents,” he said.

Said a dealer for Maruti Suzuki: “Earlier public sector banks were taking a week or longer to grant auto loans and private banks were doing it in two-three days. Now it is the other way around. In the earlier days private sector banks were not so stringent in lending. Even without Form 16, if the customers had two years in a stable job, the loan got sanctioned. Public sector banks have more checks. Despite this, they are now at par, or even quicker in lending."

Carmakers too seem to be increasingly betting on public sector banks with private banks cutting down on vehicle financing. “Public sector banks are lending in such difficult times. Though this can help sustain business, for growth to happen there has to be more lending," said Mr Mayank Pareek, Executive Officer, Marketing and Sales, Maruti Suzuki India Ltd.

According to a banking source, since the slowdown, ICICI Bank’s share in financing Maruti cars has dropped to about 1,100 cars a month from the 11,000 cars that it did in its hey day. In contrast, SBI’s share has grown to 14,000 units a month from around 8,000 earlier.

Hyundai too now has State Bank of India as the second largest financier for its cars.

“The share of public sector banks in financing Hyundai cars has been growing despite their stringent lending norms. But there is scope for more aggression,” said Mr Arvind Saxena, Senior Vice-President, Sales and Marketing, Hyundai India.