The Hindu Business Line : More car makers partner PSU banks for finance

Signs of revival
SBI, Punjab National Bank, Syndicate Bank, Bank of Baroda active in car financing
Interest rate of PSU banks in the range of 11% to 14%; private banks charge 13% to 15%

Our Bureaus

Mumbai/New Delhi, Feb. 12 With car sales showing signs of revival, more car manufacturers are signing up with public sector banks for attractive rates of interest to push sales further.

Tata Motors today said it has tied up with Corporation Bank to fund purchase of its range of passenger vehicles. The company has said that the bank will offer loans up to 85 per cent of the vehicle’s on road price, for periods up to five years, at 11.75 per cent a year interest. The bank will also process the loan applications within seven days.

This facility, according to a Tata Motors press release, will be available at all the 1,073 branches of Corporation Bank and 329 sales touch points of Tata Motors.

The dealers will be trained to explain the loan formalities. Both Tata Motors and Corporation Bank will organise joint sales promotion activities and display each other’s products in their premises.

Tata Motors agreement with Corporation Bank is part of the efforts being taken by car manufacturers to have such tie-ups with public sector banks as they seek to spur car sales.

Other banks

Banks such State Bank of India, Bank of Baroda, Punjab National Bank, Syndicate Bank, Union Bank and some regional PSU banks are active in vehicle financing and have agreements with car manufacturers. Interest rates vary from 11 per cent to 14 per cent, whereas private banks charge in the range of 13 per cent to 15 per cent.

Maruti Suzuki, the market leader, has been partnering public sector banks for some time and has increased its financing arrangements with more of them. Hyundai Motor India too has getting into such arrangements with the nationalised banks, even as private sector banks have slowed down on car financing.

“Public sector banks have definitely improved. Earlier, two-thirds of financing was from private banks and the remaining from public sector banks. Now, the ratio of state-owned banks is as high as 67 per cent,” said Mr Mayank Pareek, Executive Officer, Maruti Suzuki India Ltd.

He said the one of the reasons for the increase in their share of car loans is that sales are growing in smaller centres, where the public sector banks have a strong presence. “They know their customers for a long time and so they can lend when they want to buy a car,” he said.

Growing finance

Utility vehicle manufacturer Mahindra & Mahindra also sees PSU banks showing greater interest in vehicle finance. “The share of PSU banks in financing our vehicles has gone up in recent months. Roughly 20 per cent of Mahindra vehicles, where finance is availed of, are now financed by PSU banks,” said Mr Rajesh Jejurikar, Chief of Operations, Mahindra & Mahindra Ltd.

At a time when private banks are more conservative than in the past, the PSU banks are strengthening their presence, he said.

Even premium car maker like Honda is taking a similar route of tying up with nationalised banks. “In April, the share of public sector banks in financing Honda cars stood at 11 per cent. This has now gone up to 18 per cent,” confirmed a spokesperson for Honda Siel Cars. According to her, the company was scouting for more such partnerships to bolster its sales.

Mr Yogesh Narola, a Tata Motors dealer in Delhi, said that PSU banks were willing to finance vehicles.

“Earlier, out of 150 cars we sell a month, the number of cars being financed by PSU banks used to be 10 a month. Now, it has gone up to 20-25,” he said.

According to Mr Narola, other than SBI, the biggest public sector lender for car buyers are Bank of Baroda and Punjab National Bank are active in vehicle financing. Mr Shailesh Bhandari, a Pune-based dealer of Tata Motors, said local co-operative banks are also financing car purchases.

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