Moreover the private banks have been reluctant in their lending as a fear of increasing defaults. This has given an edge to the public banks that are extending auto loans in the range of 12.5% to 13.5%.

A company official said, "Private sector banks have been going slow and are not very eager to offer car loans."

ICICI Bank that was the market leader in auto loans space till early 2008 has drastically reduced lending. ICICI's Head vehicle finance N R Narayanan said, "We have decreased our exposure in the market and now our total loan size is now reduced to around Rs 500 crore annually. We have a large portfolio of the auto vehicles already financed in the past and are focusing on managing it."

A year ago the auto loan market was dominated by the private banks with a combined market share of 75-80%.