PSU Banks to raise their presence in the auto loan segment
By Vaibhav Aggarwal
Jan 23, 2009
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The public sector banks are taking every possible move to fill up the auto loan space that has been facing a slowdown ever since the private lenders withdrew following the global financial crisis.

The auto loan space that was primarily ruled by the private sector banks is now undergoing a change in trend. A host of PSU banks likes Union Bank of India, Syndicate Bank, UCO Bank and United Bank of India are trying to hold on every possible opportunity to accelerate car loan disbursals. They are signing pact with the leading car makers to extend finance for their vehicles.

Initially either the private lenders or non-banking finance companies (NBFCs) used to cover the majority of the vehicle loans in the country but after the global slowdown most of them exited the segment due to the fear of increasing delinquencies.

On the other hand, PSU banks that are gradually increasing their presence in the segment are taking cautious moves and asking borrowers to pay margin money of 15% of the on-road price.

Traditionally the public sector banks are not outlined for vehicle financing business. Syndicate Bank chairman & managing director, George Joseph said that since most private banks have exited the sector there is an opportunity for the PSU banks to raise their presence. He informed that Syndicate Bank was about to ink pacts with some leading car makers for in order to increase its loan disbursals.

Syndicate Bank has an auto loan portfolio of nearly Rs 800 crore and it is targeting to achieve an annual growth of 25%.

Union Bank of India Chairman and Managing Director, MV Nair also said that his bank has recently signed financing deal with Maruti Suzuki India. He said that this is a specialized line of financing and PSU banks need to be cautious in their moves in the segment where their presence is limited.

Similarly UCO Bank Chairman and Managing Director, SK Goel informed that they are also in talks with Maruti Suzuki and Tata Motors. He said that they are planning to accelerate in the car and commercial vehicles segment.

Even Bank of Baroda has recently tied up with General Motors India for financing the latter's vehicles.

Auto loans have three segments - car loans, two wheeler loans and commercial vehicle loans. The public sector banks are eying to swell up the car and two-wheeler loans. In fact the car loan rates have been decreased and are lying in the range of 11% to 12.5%.


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