The Hindu Business Line : Auto dealers make headway in talks with private banks

Bangalore, Dec. 31 Automobile dealers have made a major breakthrough in their talks with private sector banks as some of the banks have agreed to revisit their decision to pare down their exposure to auto loans.

A key member of Federation of Automobile Dealers’ Association (FADA) told Business Line that the banks are also considering a move to do away with direct sales agents or intermediaries as they tighten their internal norms for disbursing auto loans.

FADA members are learnt to have held separate meetings with the top officials of private sector banks last week in Mumbai to hammer out a solution for quick disbursal of auto loans.

They are expected to hold a series of meetings with private sector banks again beginning January 5 to discuss ways to restructure the auto loans and also on reducing defaults.

The FADA member said the banks will also handpick certain dealers across the country in consultation with the federation based on their financial strength for a tie-up with them.

Another FADA dealer who did not wish to be named said that ICICI’s auto loan disbursement has reduced to about Rs 100 crore a month from about Rs 1,000 crore earlier while HDFC’s disbursement has reduced to about Rs 200 crore a month from about Rs 600 crore to Rs 700 crore a month.

Auto finance arms of Reliance, Tata and Kotak are learnt to have significantly reduced their exposure to auto loans while Barclays Bank has almost stopped disbursing the loans and has deployed most of its employees for recoveries.

Inventory pile-up

Meanwhile, a FADA member said that the inventories continue to pile up and for some dealers it is as high as 90 days with losses as much as between 2 per cent and 3 per cent of the cost of every vehicle.

The Ford India Executive Director for Marketing, Sales & Service, Mr Nigel Wark, said that the car maker has worked closely with its dealers to keep the inventories to manageable levels.

“But the funding at the retail end continues to be a major issue,” Mr Wark said.

He said dealers can push car sales only when banks increase lending.

He said they are being over-cautious which is harming the growth of the car industry in the country.

More Stories on : Automobiles | Consumer Finance

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