Commercial vehicle loan sanctions by NBFCs fall 36% in Q2

By: |
Published: November 30, 2019 1:02:54 AM

Sanctions by NBFCs fell 34% y-o-y on an average, industry association Finance Industry Development Council (FIDC) said on Friday.

nbfc, commercial vehiclesWhile NBFCs of all categories have found it difficult to raise money at easier rates from both banks and money markets, a slowdown in auto demand has hit vehicle-financing entities particularly hard in the last few quarters.

As non-banking finance companies (NBFCs) continued to face the cash crunch in the September quarter, sanctions in the commercial vehicle (CV) loans segment dropped by as much as 36% year-on-year (y-o-y) during the quarter. Other categories of loans also saw a slide in sanctions, with the construction equipment loan segment seeing a 53% fall and property loan sanctions slipping 48%.

Sanctions by NBFCs fell 34% y-o-y on an average, industry association Finance Industry Development Council (FIDC) said on Friday.

While NBFCs of all categories have found it difficult to raise money at easier rates from both banks and money markets, a slowdown in auto demand has hit vehicle-financing entities particularly hard in the last few quarters.
Ramesh Iyer, vice-chairman and managing director, Mahindra & Mahindra Financial Services, told analysts after their Q2 results that the heavy CV segment is under pressure and growth there is unlikely to revive soon. “I would think the heavy commercial vehicle seems to be a little more under pressure than any other product is and that is reflected in the growth rate for that product and it also reflected in the sentiments from the ability to operate the capacity that each operator has build around their own businesses,” Iyer said. “So we believe that the commercial vehicle segment will continue to remain under pressure until the overall economic scenario improves, as also, until such time the government release of payment does not happen the contracting segment possibly will remain under pressure.”

In a recent report, Kotak Institutional Equities wrote that even though disbursements typically pick up in Q2, the trends this year were mixed due to a severe slowdown in auto and challenges on the funding front for small players like Magma Fincorp, Shriram City Union Finance and Muthoot Finance. “NBFCs faced multiple challenges in Q2FY20 as a slowdown in vehicle loans reflected a decline in OEM (original equipment manufacturer) sales, funding challenges plagued smaller players during most part of the quarter and a prolonged monsoon cramped lower business activity which translated to a rise in delinquencies,” Kotak analysts said.

In a report earlier this month, Credit Suisse said that Q2 witnessed the loan growth dropping to demonetisation lows of 6% because of the NBFC lending pull-back, coupled with a slowdown in bank lending.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Fitch says liquidity pressures faced by non-banking financial sector to continue
2Not through bonds, only cash, says Former RBI governor Rangarajan on banks recapitalisation
3HDFC Bank sets up committee to find Aditya Puri’s successor