More debt woes for banks? Fitch warns against auto-loan delinquencies because of this reason

Freight rates have so far not kept pace with fuel-price increases, rising by less than 15 per cent since January 2016, Fitch said in a statement.

More debt woes for banks? Fitch warns against auto-loan delinquencies because of this reason
Rating agency Fitch has warned against auto-loan delinquencies if fuel prices continue to rise.

Rating agency Fitch has warned against auto-loan delinquencies if fuel prices continue to rise. It said that high petrol and diesel prices could strain India’s commercial vehicle operators and lead to a rise in auto-loan delinquencies. Freight rates have so far not kept pace with fuel-price increases, rising by less than 15 per cent since January 2016, Fitch said in a statement.

“This is causing stress for commercial-vehicle operators, for whom fuel accounts for a significant proportion of overall costs,” the statement said. The petrol and diesel prices continue to be high despite a 34-day-long downward revision. The petrol and diesel prices were hiked for the third day in a row on Saturday. The petrol is priced at Rs 75.98 per litre in Delhi. In Mumbai, Kolkata and Chennai, petrol is being sold for Rs 83.37, Rs 78.66, and Rs 78.85 a litre respectively.

“Commercial vehicle loans make up almost all of the pools in our Indian auto asset-back-security (ABS) portfolios. Most borrowers in these pools are small operators that depend directly on their vehicles for income, and some could find it difficult to make repayments if their margins continue to be squeezed.

Our baseline assumption is that global oil prices will remain high over the rest of 2018, while further rupee depreciation is a risk amid US monetary tightening. India is also facing US pressure to reduce its oil imports from Iran, which could further stoke Indian fuel prices,” it added.

India’s fuel prices continue to be dominated by the movement in the international crude oil market. Despite expectations of fall in oil prices after OPEC decided to increase production, oil remains volatile due to US’ pressure on India, China, and other buyers to end all imports of Iranian oil by a November 4 deadline in a bid to choke the Persian Gulf state’s economic lifeline with sanctions over its nuclear programme.

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