The Public sector banks in the industry have been active in the car financing and regaining their space in the auto loan market. They seem to overtaken their private peers that have walked out from the auto lending due to the increased delinquencies.
On the other hand the PSU banks have responded to the RBI's signal to lower interest rates and thereby captured a large share in the finance portfolio of most auto makers in the industry.
Amongst the public that have been aggressively disbursing auto loans, the largest lender SBI takes a lead. The others following the leader are Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Syndicate Bank and Union Bank of India. These banks are jointly lending around Rs 1,000 crore every month against the private banks that comprise a total auto lending of nearly Rs 800 crore.
Maruti Suzuki, executive officer (marketing and sales), Mayank Pareek said that recently the PSU banks are actively taking part in auto financing. "Against the perception that they are slow in processing applications, the PSU banks have vastly improved quality of their services which today are no less than private sector banks," he added.
PSU banks hold 70% share in the financed car sales of Maruti and the remaining 30% are financed by private banks. "This used to be the opposite if you look at market share position in fiscal 2006-07," said Pareek.
Hyundai India's senior VP (marketing and sales), Arvind Saxena agreed with the view of Pareek and said, "PSU banks have been very active in the market and off late, their share in our financed car sales has surpassed that of private sector banks."
Ankush Arora, VP (sales and marketing) of GM India, also told that the PSU banks have been more competitive in the market and their share in the financed car sales of GM have increased to 45%. "It is growing, and that too rapidly," said Arora.
The PSU banks are extending loans mainly in the range up to Rs 3 lakh for small cars like Alto, WagonR, Santo and Indica. At the same time these banks are also catering two-wheelers loans.
The main reason for an increase in the auto loan portfolio of the PSU banks is the falling auto loan rates relative to the interest rates charged by the private banks. "On an average, the interest rates of PSU banks are lower by 1-1.5%," said Pareek and Arora.
Besides the wide reach of the PSU banks is also a major factor behind the success of these banks. "Much of the growth in car sales is coming from smaller regions of the country and here the PSU banks enjoy a good penetration. Also, they have good profiling of customers who may be associated with the banks for years," said Pareek.