Kick starting auto lending

Font Size

Print

Feedback

Email

Discuss

: the way for cashless transactions in fuel sales. A similar approach for financing taxis in all other metros (we still see the fuel-guzzling Ambassadors in New Delhi, Kolkata and Chennai) can spur up the demand in the commercial passenger car segment. Kolkata, for example, is currently witnessing a virulent strike by auto-rickshaw drivers, as here too, the offending, polluting vehicles have been banned; but no bank or NBFC seems to be willing to finance these owners for cars instead, or for that matter even, new auto-rickshaws. There is a great opportunity here if lenders, vehicle manufacturers and potential owners, put their heads together to work out a viable scheme acceptable to all parties.

In the personal segment for passenger cars, the slump appears more in the entry level and mid-segment than the luxury segment. Here, the approach will necessarily have to be innovative. One recollects seeing a few ads recently, where builders were offering a car free for booking a flat - a rather innovative tie-up for kick starting demand in both real estate and passenger cars. While high interest rates and scarce liquidity are keeping away buyers, the fear of high NPAs in depressed economic conditions is making bankers shy of lending to this segment. A win-win for both categories could be in the form of a tie-up with employers to finance employees. 'Passenger car manufacturers can have tie-ups with large employers like the government, banks, railways, etc, or private sector giants like TCS or Infosys, whereby cars can be purchased by employees sans dealer commission and on attractive terms, both price-wise and interest rate-wise, and a check-off facility provided to the lending bank, whereby the employer undertakes to remit the EMI to the banks through salary deduction, and also agrees to inform the bank in case an employee chooses to quit his job.

This would secure the interests of both borrowers and bankers and greatly reduce loan delinquency, if not eliminate it altogether. With the Nano likely to enter the passenger car market soon, such an arrangement, which provides credit enhancement to lenders and attractive discounts to buyers, can substantially boost demand.