While demand for auto loans has been lower this festive season as compared to last year, there were signs of demand picking up in late October, Ravi Narayanan, senior general manager, home and vehicle loans, ICICI Bank, tells Shritama Bose.
While demand for auto loans has been lower this festive season as compared to last year, there were signs of demand picking up in late October, Ravi Narayanan, senior general manager, home and vehicle loans, ICICI Bank, tells Shritama Bose. Metros such as Mumbai and the National Capital Region (NCR) have seen a 20-25% dip in festive auto sales, he adds. Edited excerpts:
What has demand for home and auto loans been like this festive season?
To tell you very frankly, this time the festive demand has not been as exciting as it possibly was last year. All retail demand for auto and home loans is led by sentiment. Even though the interest rates may have changed by 0.5% or 1% here and there, a 1% change in interest rate makes a difference of only Rs 45-50 per lakh in an instalment.
So for an auto loan of Rs 6 lakh, even if the rate rises by 1%, the change in EMI is only about `300, which is not much for someone who is paying `20,000 every month. So that is not the deciding factor for buying or not buying a car. Right now, the news flow around crude prices going up and other things, possibly the sentiment is damp. The festive mood is yet to pick up.
Do you see any pick-up in demand going ahead?
The silver lining is that over the last one week, we have seen car demand pick up. Navratri did not see a great pick-up, but I think the build-up towards Diwali is already happening.
In percentage terms, how much growth would you have seen month-on-month?
On a year-on-year (y-o-y) basis, auto loans were growing at about 7-8% till September for the industry. However, the key point to note in this 7-8% was that the metro markets were actually flat and the non-metros were the ones which were growing. Even now, the metro markets are on a flat trajectory, while non-metros, because of a healthy monsoon, are growing almost at 14-15%. The home-loan market is also growing in the tier-2 locations at a faster pace. So if you ask me, on a y-o-y basis, the festive demand is almost flat compared to last year, but hopefully by Diwali, it will catch up to about 7-8% growth.
Auto dealers have said that this year, sales have actually fallen by about 15-20%. What has your experience been?
The metros such as Mumbai and NCR (National Capital Region) are seeing a drop by about 20-25% compared to last year. Non-metros are still seeing a 7-8% kind of growth on a y-o-y basis.
Do you see the demand pick-up sustaining over the next few months?
Tough question to answer because Diwali pick-up has started only a few days back, while typically the Diwali sales begin much before Navratri itself. Given that trend, we should not hazard a guess right now. It can go either way.
Any incentives you are offering to borrowers?
We are not offering any incentives, but in collaboration with the market players, some amount of freebies are being given. Many manufacturers are giving discounts in various forms, which can be up to 5-7% on the value of the car. Auto financiers are offering some freebies.
For instance, processing fees is getting waived in some markets, some pockets and for some manufacturers, but the freebies are coming more from the manufacturers’ side than the financiers’ side right now.
Housing finance companies (HFCs) and non-banking financial companies (NBFCs) are presently in a difficult position in terms of their ability to lend. Are you seeing some demand from their markets moving to you?
Definitely yes. Home-buying in India is concentrated among people who are buying their first house and for their own use. So there may be some customers who were very close to concluding things (with NBFCs) and we are seeing some amount of such enquiries coming in because they want the buying process to be completed.
Have you increased your portfolio buyouts from NBFCs? Which categories of loans are you buying?
We keep buying portfolios on an ongoing basis and we are continuing the way we do. We buy retails assets generally, including commercial vehicles, auto and mortgage portfolios.
These are bought not as a black box, but by cherry-picking and looking through each case.