Car loans: SBI gets tough; to auction defaulters’ vehicles

Have you taken a car loan? Make sure you do not skip the equated monthly instalment (EMI) payments on the loan. Or else, your bank may seize your vehicle and auction it.

With increasing bad loans, banks are no longer willing to take a lenient view on car loan defaults.

State Bank of India is taking a lead in this recovery initiative.

“Once there is a default, we don’t want mere repayment of the pending instalment. We are calling up the advance (asking for full repayment of loan). If it is not paid within seven days from the issue of notice, the vehicle will be seized,” Rehman, a senior SBI official, told BusinessLine .

SBI has started identifying car loan defaulters in different regions.

“We are going to seize 500 cars in the coming few weeks in Hyderabad alone to bring down non-performing assets in car loans,” he said.

The auto loan portfolio of the bank had increased from ₹26,411 crore in June 2013 to ₹28,202 crore in June 2014, a growth of 6.8 per cent. Bad loans had gone up over 1 per cent and the bank wants to bring it down to 0.25 per cent.

The profile of the defaulters is also a cause for concern for the bank.

“Most of the defaulters are those engaged in business while the salaried class is more prompt with payments. The general adverse economic condition could be behind this,” the official said.

For other banks too, the increase in auto loan portfolio has been substantial.

For example, Andhra Bank registered 34.6 per cent rise in auto loans at ₹650 crore at the end of the first quarter. For Punjab National Bank, vehicle loans went up by 27 per cent to ₹3,698 crore.

A senior executive of Syndicate Bank attributed the “bubble” in auto loans to renewed focus of banks on retail in the absence of tangible corporate credit offtake.

“The cracks are visible and prevention is better than cure. So, it pays to be tough on car loan borrowers,” he said.

Generally, a bank can seize the vehicle after two successive defaults. But borrowers tend to take it lightly and pay two instalments that are due and take the vehicle back. But, banks are no longer willing to allow this. When there is a default pattern, full repayment of loan is sought.

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