Despite rising credit demand for vehicle loans post the goods and services tax reforms, banks and non-bank finance companies are seeing an uptick in delinquencies.
Commercial Strain
The commercial vehicle (CV) segment, which is integral to supply chain activity, has emerged as a key area of pressure as volatile utilisation levels, fluctuating freight rates, longer receivable cycles, and higher fuel and maintenance costs have strained cash flows for transport operators. Analysts believe that the stress in the CV segment reflect broader supply chain inefficiencies and demand volatility, which has translated into higher delinquencies despite stable disbursement trends.
Divergent Recovery
Within vehicle-linked retail lending auto loans remain resilient, with 90+ days past due (DPD) stable at 0.6% and no year-on-year deterioration. In contrast, two-wheeler loans have seen rising stress, with 90+ DPD increasing 22 basis points year-on-year to 2.2% by September, data from TransUnion CIBIL showed.
“We do see some stress when we are looking at two-wheeler loans and commercial vehicle segments, but we want to see how the festive season growth has helped in terms of overall portfolio dynamics. We are closely monitoring this segment,” Bhavesh Jain, MD and CEO TransUnion CIBIL said.
AM Karthik, Sr Vice President & Co-Group Head, Financial Sector Ratings at ICRA, said that they are seeing a measured approach by banks giving out commercial vehicle loans. For non-banking financial companies, he added that the 90+ DPD has gone up by 30-40 basis points during H1FY2026 for most of the players, indicating rising stress in this segment.
Analysts said that while credit growth is robust, sustaining asset quality would require disciplined underwriting and cautious expansion. According to recent sectoral deployment data, the growth in bank credit to vehicles rose by 12.5% on year in October from 7.3% a month ago. The year-on-year growth was at 12% in October 2024.
“While CV segment has seen some rise in delinquencies, this cannot be construed as structural weakness in the sector. Further, the benefit and improved load availability due to rise in the manufacturing activity post GST reduction will reflect with a lag, sometime in fourth quarter of the year,” Prakash Agarwal, Partner – Gefion Capital said.
