With the auto industry facing a massive slowdown, most auto companies are approaching public sector banks (PSBs) asking the latter to restructure retail loans. The companies are looking at loan adjustment in terms tenure and interest rate, or both. Confirming the development, a public sector banker said, ?Auto companies are either asking banks to give them an extension in timing or slash interest rates on particular tenures.?
Recently, in a bid to help auto companies, SBI has slashed interest rates on auto loan to 10%, which is frozen for a period of one year. And, Union Bank of India on Saturday slashed interest rates on new car loans by up to 1.5% and Punjab National Bank announced a cut in car loans by 50 basis points with effect from Sunady.
A large public sector bank official on condition of anonymity said, Tata Motors has approached the bank to restructure its loans. ?SBI is looking at specific sectors affected greatly by the downturn. The auto sector has been affected deeply. Last quarter the sales saw a massive dip. Hence, to give a boost to this sector, the bank is coming up with various schemes,? the official noted.
Many auto companies like Tata Motors, Hyundai Motor India and Mahindra & Mahindra (M&M) have already joined hands with PSBs in a bid to prop up demand.
?Since, corporate demand is on a slack, PSBs are joining hands with auto companies, so that they can get aggressive on the retail front,? pointed out a senior official with M&M.
?In the current scenario, we expect PSBs to provide the most cost-effective funding solutions to our customers,? said K Sridharan, chief financial officer, Ashok Leyland.
Said Ravi Kant, managing director, Tata Motors, at the company?s third quarter result announcement, ?Hopefully, the worst is over, and Q409 is expected to be far better than Q309.?
Auto sales had dipped significantly in the last quarter, with Tata Motors alone reporting a loss for the first time in several years.
Arvind Saxena, vice-president, marketing and sales, Hyundai Motors India, noted, ?The loan rejection rate is still high around 35%-40%. Interest rates and extension of loan by the banks remain a concern.?
Says a spokesperson with Toyota Kirloskar Motor, ?We at Toyota work very closely with our preferred financiers to ensure that the impact of the credit squeeze is minimised on our customers. Low interest rates, low EMIs and easy down payment are very popular and well-accepted finance packages in this regard. In these difficult times, a close coordination between the financiers and manufacturers is very essential and we have specific teams who work in this direction.?
While Maruti Suzuki?s exposure to PSU banks is 60%, for Hyundai Motor India, the exposure is around 30%. Currently, SBI?s exposure to Tata Motors and Hyundai stands at Rs 10,000 crore, said a source.
According to sources in the dealership network, ?Earlier ICICI Bank was the leader in auto loan disbursal, making around 80% of it. SBI was leading in the PSU segment. However, now the dynamics has changed. SBI has surpassed ICICI to become the leader in auto loans disbursals.?
Besides SBI, Tata Motors has roped in Corporation Bank and the Central Bank of India. Hyundai Motor India has also tied-up with Punjab National Bank, Canara Bank and Syndicate Bank for retail loans. Ashok Leyland and Corporation Bank have signed an MoU for retail financing commercial vehicle customers.
Readying for a smooth ride
• Many auto firms have already joined hands with PSBs in a bid to prop up demand
• They want PSBs to provide cost-effective funding solutions to customers
• Hyundai Motor has tied-up with PNB, Canara Bank and Syndicate Bank
• Tata Motors has approached SBI to restructure loans. It has also roped in Corporation Bank and the Central Bank