Lloyds Finance, which recently stopped all disbursements in auto finance due to the high level of delinquencies, is now acting as a direct sales agent for Countrywide Finance -- one of the most aggressive players in the auto finance business.

Mafatlal Finance too has started undertaking DSA business for foreign banks. Mafatlal Finance is, however, mostly into marketing of personal loans for these banks. Mafatlal Finance, it may be recalled, resorted to downsizings during the last financial year by retrenching a number of its employees.

"Finance companies, which came into being to offer complimentary services to that of banks, are now offering complimentary services to the larger NBFCs," quipped a senior executive at an NBFC. Finance companies are also undertaking the marketing of credit cards and retail deposits for foreign banks.

Moreover, with foreign banks having entered into the auto finance arena offering loans at lower rates of interest, NBFCs have started losing their foothold in the market. While NBFCs offer auto loans at anything between 19 and 24 per cent, foreign banks are able to offer loans at rates of 15-17 per cent on account of their lower cost of funds.

The future for NBFCs remains bleak with fresh disbursements in auto finance having dwindled by 50-60 per cent over the last financial year. A number of NBFCs have already stopped disbursing fresh loans for want of good customers and are concentrating on recoveries.

Over the last year, heavyweights like General Motors Acceptance Corporation, Avco Financial and Sumitomo have entered the Indian car finance business through tie-ups with local players. While GMAC has tied up with 20th Century Finance Corporation, Avco Financial and Sumitomo have tied up with Motor & General Finance and Sai Service Stations respectively. This has effectively made the going increasingly difficult for existing players in the market. Apple Finance is on the lookout for a foreign partner.

The worst hit among NBFCs have been the ones in the truck financing business. With fuel prices rising and freight rates remaining flat, the truck financing business has been witnessing huge defaults over the last year.