Chennai: NBFCs are losing market share to banks in car and SUV financing and are shifting their focus to used cars, two-wheelers and commercial vehicles instead. A combination of capital constraints among NBFCs and renewed aggression from public sector banks have led to this situation, said, auto financiers. In a bid to grow their retail portfolio PSU banks are offering auto loans at 7.25% to 7.7% compared to NBFCs whose rates range from 8.75% to 11%.
While State Bank of India is offering auto loans starting from 7.7% others are even cheaper with Central Bank of India offering loans at 7.25% followed by Canara Bank (7.3%). United Bank of India (7.4%) and Indian Overseas Bank (7.55%). “In recent times NBFCs have lost market share to PSU banks which have become more aggressive and that includes Tata Motor Finance” said Said Tata Motors group CFO PB Balaji.
Unlike banks, NBFCs rely on wholesale funds. Banks are now going slow in lending to finance companies with RBI encouraging banks to take the co-lending model to take advantage of NBFCs network.
According to M Ramaswamy, chief financial officer at Sundaram Finance banks are flush with liquidity and can bring down rates. “We are facing pressure in some markets depending on how aggressive they turn. It is a mixed bag for us — we mostly cater to individuals with higher risk profiles and because of our good ratings our cost of funds has also come down so in certain regions we have lost market share and in others, we have gained.”
Sundaram Finance saw a 20% gap in loan disbursements in the September-ended quarter, 2020. Cholamandalam Inv. & Fin. (CIFC) saw total disbursements down 30% year on year in its vehicle finance segment for the September 2020 quarter And according to research reports of brokerage firm Motilal Oswal. This excludes the tractor and construction equipment (CE) segments.
Shriram Transport Finance, disburse Rs 650 crore of loans which was half of last year. Also, 97% of disbursements were in the used vehicle segment. “Our focus is on individual and small truck owners who prefer to buy used vehicles. Normally banks do not lend to used vehicles because it is time-consuming, requires vehicle valuation and ownership transfer paperwork,” said Umesh Revankar, MD & CEO, Shriram Transport Finance. There are nearly 10,000 small and medium NBFCs and 30,000-40,000 private lenders. Ditto for Muthoot Capital Services which, said COO Madhu Alexiouse is into two-wheeler and pre-owned car business and not in new cars or trucks.
The PSU bank aggression is beginning to show up on balance sheets as well. Car loans sanctioned by PSU banks like SBI went up by 27% year on year, in the second quarter, and 7% on a sequential basis. For Indian Bank, disbursement of auto loans grew from Rs 3,243 crore in the June quarter, 2020, to Rs 3,353 crore in the September quarter. A senior official at the SBI (Tamil Nadu and Puducherry circle) said “Unlike pre-Covid times, we saw demand and disbursement of car loans doubled even in hill stations like Ooty, in Tamil Nadu. The purchasing trend is unchanged with most of the demand is for cars below Rs 20 lakh.”



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