NEWS & ADVICE : CAR LOANS
Banks seem to be hesitant in extending finance scheme for Nano
By Vaibhav Aggarwal
Mar 2, 2009
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The low cost, Tata's Nano is soon going to roll out in the roads but the banks do not look keen into financing this particular vehicle.

Experts from the industry believe that Tata's exclusive deal with State Bank of India to finance the car is the main reason for abstaining other banks from coming out with their financing schemes for the new Rs 1lakh car.

Chief General Manger, Punjab National Bank, Mr R.I.S. Sidhu said, "We believe that Tata Motors has entered into an agreement with SBI. Unless we are approached by the company, we may not take the initiative. But our philosophy has been that there is no risk in lending to our existing customers who may be looking to buy the car. We hope to finalise the package for financing the Nano by end of March."

Tata Motors has entered an agreement with the largest lender, State Bank of India (SBI) to launch a finance scheme designed exclusively for Nano. This has kept the momentum low for most banks that might come out with a financing scheme for Tata'a Nano.

However some of the private sector banks claim that they will launch their schemes only after reviewing the booking pattern of the car. They will make sure that no speculative orders are placed.

"There is still lot of time to decide on the package. In April, the bookings will start and by the time deliveries are made, it could be May or June. We will certainly watch closely whether the maximum number of customers who are booking the car are salaried, first time buyers or second-hand car purchasers and then decide," said Mr Rajan Pental, Senior Vice-President, Auto loans, HDFC Bank.

Chief Executive Officer of Kotak Mahindra Prime Ltd, Mr Sumit Bali said, "After we are clear about the terms and conditions of the bookings, we can take a call. If the minimum amount to reserve a car is very small, there could be lot of speculative booking and later on the car may be transferred to somebody else's name."

At the same time banks will review the varying interest rate considering the income slab of the buyer. The banks feel that most of the car buyers would the two-wheeler migrants and therefore they want be sure of the demand prospectus along with the bank's buyer's ability to repay before coming out with a scheme for Nano.

 


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