During last one year, the share of public sector banks in auto finance has increased significantly, and in few cases nearly doubled, due to competitive interest rates offered by these banks.

However, private players are again coming in limelight because of more tie-ups with car dealers and competitive interest rates.

According to Hyundai data, in the last one year, the share of private banks in car finance has increased from 23 percent to 28 percent. On the other hand, the share of public sector banks has gone up to 31 percent from 29 percent. However, cash purchases have decreased from 42 percent to 35 percent.

A spokesperson from Hyundai said," By 2010, we expect public sector and private sector banks to be at the same level of 35 per cent, with cash purchases accounting for 30 per cent of sales. This data is for Hyundai but possibly reflects the industry trend."

Considering Honda Siel, the share of private banks steadily increased from 29 percent in january 2009 to 36 percent in June 2009 and 45 percent in September 2009 while the share of public sector banks increased from 28 percent in January 2009 to 35 percent in June 2009 but dropped to 22 percent in September 2009.

"There is a definite sign that private players are back in car financing. We expect them to bring in new customers that will result in an overall increase in the market. It helps in better availability of finance, whose positive impact is seen in rural and semi-urban sales," said Mayank Pareek, executive officer (marketing & sales), Maruti Suzuki.

The difference between the interest rates offered by private and public sector banks is also decreasing.

An Axis bank executive said that car loans had significantly increased in the last few months since the festive season. He also said that factors like low turnaround time and dealer tie-ups favoured private sector banks.