New Delhi | Mumbai: Fewer people are buying passenger vehicles and two-wheelers taking loans since the market reopened after the lockdown, a development auto industry executives attribute to increased caution from lenders.
Lenders have tightened new disbursements to borrowers who have taken advantage of the moratorium on existing loans, executives said. Several of them have also increased the consumer credit score needed to grant new loans, they added.
Bankers who spoke said there had been no changes in their lending regulations, but banking industry insiders ET spoke with agreed that they now offer little flexibility on the rules at all. by granting loans. Additionally, with a large number of employees now working from home, disbursements take longer and this is misinterpreted as reluctance to lend, they said. In addition, fewer people are looking for new loans because of wage cuts and job losses.
At Maruti Suzuki, the share of vehicles financed by loans fell to a three-year low at 77% of retail sales in the past two months. At two-wheeler manufacturer Honda Motorcycle & Scooter India (HMSI), this fell 5 percentage points to 40% in May-June compared to the pre-Covid period.
Lending Standard Review Comes at a Time of Vehicle Prices Rising After Transition to BS-VI Emissions Standards~
“With income levels dropping after Covid-19, it’s understandable that many banks have started to re-examine credit scores. In cases where the borrower has made use of the moratorium, it is often thought that if he cannot repay one loan, how can he benefit from another, ”said Shashank Srivastava, executive director of marketing and finance. sales, Maruti Suzuki.
According to people in the know, lenders allowed an 8-10% easing of the minimum income required to make a certain loan amount. But now credit managers have been told to stick to the rulebook. Pop-up ads on the websites of banks offering car and two-wheeler loans have also declined significantly.
Executives in the bank and the auto industry said several lenders had increased the credit rating required to provide loans to employees and the self-employed. Lenders have become particularly cautious of people working in the hospitality, travel, tourism and aviation industries, who have been hit hard by the impact of the Covid-19 pandemic.
“The caution comes from the fact that financiers fear that customers who have opted for voluntary moratoriums may default unintentionally and therefore have changed their policies,” said Naveen Soni, senior vice president of sales and service at Toyota Kirloskar.
The review of loan standards comes at a time when vehicle prices have increased following the transition to BS-VI emissions standards.
Automakers cited lower interest rates which they said encouraged many to consider purchasing vehicles through loans~
“Logically, with the rise in vehicle prices, the penetration of finance should have increased. But the reverse is true, ”said HMSI Marketing and Sales Director YS Guleria.
On the bright side, automakers cited lower interest rates they said encouraged many to consider purchasing vehicles using loans.
Tarun Garg, Hyundai Motor India Director of Sales and Marketing, said: “This is a pandemic-induced transitional phase. Liquidity is not a problem; auto financing is a safe business with very low NPAs. Banks are reconsidering their lending criteria. Financing is a key catalyst for auto sales and will support the industry over the medium term. “
Nearly half a dozen banks put the auto industry on a prudent lending list in May. But that has changed now, the bankers said.
HDFC Bank continues to have careful profiling of customers before lending and there is no major change before or after Covid for granular lending like automotive, said Arvind Kapil, group leader for loans to individuals. individuals.
“We expected things to get back to normal in three months. Over the past few weeks there have been announcements of lockdowns by a few cities and districts, which adds a bit of anxiety, but otherwise the pull. overall in the market is quite strong and we expect the company to return to pre-Covid levels, ”he added.
Vyomesh Kapasi, CEO of Kotak Mahindra Prime, said the availability of retail credit for cars was not an issue.
“Of course there are a few segments hit hard by Covid-19 and the industry is taking a cautious approach towards those segments,” he said. “The real concern is the increase in lead times due to the logistical challenges facing the industry and the goal is to reduce that. We have also launched simple products to address this problem.