The Hindu Business Line : Auto loans moving into top gear

Mumbai, Oct. 15 The lacklustre auto loan market seems to be on course for a revival thanks to lower interest rates and a turnaround in customer sentiment.

The launch of new models in September, ahead of the festive season, has also fuelled demand for auto loans, said analysts.

According to data from the Society of Indian Automobile Manufacturers, during April-September, total vehicle sales, which includes cars, commercial vehicles, two- and three-wheelers, increased by 14.1 per cent.

HDFC Bank saw its auto loans increase to Rs 17,000 crore as on September 30, 2009, from Rs 13,500 crore in the same period last year, a 26 per cent rise. Mr Paresh Sukthankar, Executive Director, attributed the pick-up in demand to improved consumer sentiment and lower interest rates. The launch of a significant number of new cars also helped, he added.

“As a bank we have gained market share,” he said.

The revival in demand has also prompted ICICI Bank to re-enter the segment, said an official from the bank. The bank had gone slow on auto loans last year due to the high rate of default and a slowdown in demand.

Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank, also said the vehicle finance segment has started growing again. “Disbursements are getting back to normal. At our peak, we used to disburse Rs 550 crore. This came down to Rs 230-Rs 240 crore in December. Now, it is around Rs 480 crore. It should be back to peak levels by the end of this fiscal,” he said.

Bajaj Auto Finance saw its two- and three-wheeler deployments double to Rs 312 crore in the second quarter of this fiscal, against Rs 151 crore.

“Since our business is mainly captive finance, we expect our disbursements to go up, owing to the launch of the Bajaj Discover 100 cc,” said Mr Rajeev Jain, CEO, Bajaj Auto Finance.

Public sector banks becoming more active in the auto financing space has increased the penetration, said Mr Sumit Bali, CEO, Kotak Prime.

The industry has grown at a rate of 8-10 per cent and the premium end is growing faster, he added.

For the September quarter, the NBFC’s disbursements would be close to Rs 900 core, which is a growth of 35 per cent over the June quarter and a growth of about 45-50 per cent over the corresponding quarter last year.

This fiscal, the auto industry will grow in double digits and the auto financing industry will grow about 10-11 per cent higher than that, Mr Bali said.