CHENNAI: NBFCs are losing market share to banks in car and SUV financing and are shifting their focus to used cars, two-wheelers and commercial vehicles instead. A combination of capital constraints among NBFCs and renewed aggression from public sector banks (PSBs) has led to this situation, said auto financiers. In a bid to grow their retail portfolio, PSU banks are offering auto loans at 7.25% to 7.7% compared to NBFCs whose rates range from 8.75% to 11%.
While State Bank of India (SBI) is offering auto loans starting from 7.7%, others are even cheaper with Central Bank of India offering loans at 7.25%, followed by Canara Bank
(7.3%), United Bank of India
(7.4%) and Indian Overseas Bank (7.55%). “In recent times, NBFCs have lost market share to PSU banks, which have become more aggressive and that includes Tata Motor Finance,” said Tata Motors group CFO P B Balaji. Unlike banks, NBFCs rely on wholesale funds. Banks are now going slow in lending to finance companies with RBI encouraging banks to take the co-lending model to take advantage of NBFCs’ network.
According to M Ramaswamy, chief financial officer at Sundaram Finance, banks are flush with liquidity and can bring down rates. “We are facing pressure in some markets, depending on how aggressive they turn. It is a mixed bag for us — we mostly cater to individuals with higher risk profiles and because of our good ratings, our cost of funds has also come down. So, in certain regions, we have lost market share and in others, we have gained,” he said.
Sundaram Finance saw a 20% gap in loan disbursements in the September-ended quarter, 2020. Cholamandalam Investment & Finance Company (CIFC) saw total disbursements decline by 30% year-on-year in its vehicle finance segment for the quarter-ended September 2020, according to research reports of brokerage firm Motilal Oswal. This excludes the tractor and construction equipment (CE) segments.
Shriram Transport Finance disbursed ₹650 crore of loans, which was half of last year. Also, 97% of disbursements were in the used vehicle segment. “Our focus is on individual and small truck owners who prefer to buy used vehicles. Normally, banks do not lend to used vehicles because it is time-consuming, requires vehicle valuation and ownership transfer paperwork,” said Umesh Revankar, MD & CEO, Shriram Transport Finance.