PSU banks anticipate growth in vehicle loans in fiscal year

At present there is slowdown in economic but the major public sector banks are anticipating growth in Auto Loans by 20-25 per cent for the purchase of cars and other passenger’s vehicles in the current fiscal.

Though private sector rivals are restraining from lending to the auto sector and are expecting a much lower growth.

The major reason is that on car finance PSU banks are charging lower interest rates in comparison to the private sector banks. The lending rates of the public sector banks range from 11.75 to 13.75 per cent, private sector banks charge 15 per cent and above.

A State Bank of India official said: “We are growing our portfolio faster than the average market growth rate.”

SBI has recorded a powerful growth of 30 per cent year-on-year in its auto loan portfolio. The bank had an exceptional auto loan portfolio of Rs 8,029 crore as on September 30, 2008 as against Rs 6,153 crore as on September 30, 2007.

Another PSU bank, Union Bank of India, too has booked around 25 per cent year-on-year growth in its auto loan. “Unlike some banks, which resort to direct sales agents to garner business, we prefer dealing with customers directly through dealers. This way we have control over the customer profile,” said a senior bank official.

The bank has set around Rs 1,000 crore for auto loan.

On the other hand the largest private sector bank ICICI Bank does not hope for much growth in auto loans in the current year.

“Primary demand in the four-wheeler segment is coming down. The ratio of actual sales to purchase enquiries is coming down,” said Mr N.R. Narayanan, Head of Vehicles Business, ICICI Bank.

According to ICICI official in the next six months, the car loan market may witness de-growth. He said, “By March 2009, I see a flat to negative growth”.

Mr Mayank Pareek, Executive Officer, Marketing & Sales, Maruti Suzuki Ltd, said “private sector banks such as ICICI Bank and HDFC Bank, which were aggressive players in auto finance three-four years ago, have noticeably scaled down their lending from the beginning of this year”.

“ICICI Bank’s share of financing our vehicles dropped to five per cent now from 35-40 per cent earlier. We anticipated it and entered into agreements with PSU banks. Two years back, we tied up with SBI and associate banks, and now we are building on that and also the tie-ups with other PSU banks.”