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Priyanka Vyas

New Delhi, Aug 6 Two-wheeler finance has hit a roadblock as banks are pulling out their retail presence from dealerships.

After Citibank, the country’s second largest bank ICICI is learnt to have dismantled staff from the retail counters, compelling the dealers to search for alternative modes to make finance available for their prospective customers.

Enquiries at various dealerships in the city revealed that the bank had shut its shop at the showrooms. While ICICI Bank says that it is changing the model of its two-wheeler financing, dealers and industry officials view the step as a subtle way to sharply reduce their lending by limiting access to customers at the showrooms.

According to the bank, the shift in the strategy is due to high operating costs. This will enable the bank to leverage its branch network and also choose its customers, thereby preventing the chances of defaults.

“We are not exiting from two-wheeler finance. We are just changing the model of our financing. We believe that we have a strong network of branches. So instead of advancing loans at dealerships, we would do so from our existing branch network,” Mr N. R. Narayanan, Group, Business Head, Vehicle Loans, ICICI Bank told Business Line.

He explained that the model would be implemented only in the case of two wheelers. For cars, it would continue lending from the dealers’ showrooms.

A Hero Honda dealer who has three-four showrooms in the city said, “We just received information that ICICI would no longer lend and will move its staff from our showrooms, though they have not given any reason for resorting to such a step.”

His dealership sells over 4,000 units annually, accounting for overall sales of 16,000 bikes across its four showrooms. Bajaj’s dealerships here also confirmed the same move.

“From the last 15 days of July, ICICI had started communicating its intentions to us. But from this month, they have stopped lending.”

Industry officials say that it could be mainly due to a build up of non-performing assets triggered by the stricter guidelines issued by the Reserve Bank of India on recovery of vehicles in case of defaults.

In the second half of 2007, the central bank had issued guidelines preventing banks from forcibly seizing vehicles by employing recovery agents. Since then, banks have been going slow in lending. This is compelling two wheeler companies such as Hero Honda, Bajaj, and TVS to explore tie-ups at a local level to boost sales, especially in the rural areas which account for 45-50 per cent of the country’s two-wheeler market.

“There seems to be lot of pressure on the retail portfolio in the case of two wheelers, because of which some banks are going slow and compelling other players to exit the business,” said a banking official, on condition of anonymity.

Hero Honda, for one, is increasing its tie ups with regional and cooperative financing institutions to boost sales.

However, dealers and manufacturers feel that with leading players like ICICI pulling out presence from retail outlets, it would be more difficult to sell vehicles in the coming festive season.

More Stories on : Two/Three Wheelers | Consumer Finance | ICICI Bank Ltd

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