Tepid sales of cars and bikes during the Navratra festival period and even ahead of Diwali have resulted in a dull festive season for banks.
Most bankers concede that disbursements of auto loans have been slower this time around compared with 2017. The Navratri-Diwali period is typically the peak season for growth in vehicle loans.
Amid the gloom, State Bank of India (SBI) has waived pre-payment penalties for auto loans, in addition to the waiver on processing fees that it offers every year. Those taking a personal loan from SBI need not pay processing charges either. It has also reduced by 25 basis points (bps) the spread over marginal cost of funds-based lending rate (MCLR) charged for home loans of over Rs 35 lakh.
SBI managing director PK Gupta said while auto loans had slowed, there was good demand for personal loans. “The numbers are slightly lower compared with last year as far as auto loans are concerned. But personal loans are seeing good demand. We have also launched a pre-approved personal loan product on our Yono app, which has been seeing good demand, too,” he said.
Some bankers do see loan disbursements picking up in late October. Ravi Narayanan, senior GM (home and vehicle loans) ICICI Bank, said demand had improved in October last week.
“To be frank, this time the festive demand has not been as exciting as it possibly was last year. Auto loans are typically driven by sentiment and now with all the news flow around crude prices, etc, sentiment may have dampened. But, the silver lining is that in the last one week’s time, we have seen car-loan demand picking up,” he said.
Narayanan added that while in September, auto loans in the banking system were growing by around 7-8%, much of this demand was coming from outside the metros. Home loans are also doing better in tier-2 locations than in metros.
According to dealers selling cars and bikes, sales during the Navratri period has been down by 10-20% this year. Sales have been dented by the new third-party insurance norms as well as the rise in fuel prices. A liquidity crunch in the markets has also made loans more expensive, thus hurting demand, some dealers say.