PSU Banks take leading position in auto loan segment

Public sector banks are leading in auto loan segments. PSBs have lent Rs 22,000 passenger car and two-wheeler loan market. Thus the private sector banks who used to be the leading lenders have been overtaken by their public sector counterparts. The increased delinquencies has led the private sector reduce their coverage in the auto loan segment.

Big PSU banks such as SBI, Bank of Baroda, PNB, Canara Bank, Syndicate Bank, Bank of India and Union Bank of India every month in cooperation are lending around Rs 1,000 crore in the Rs 1,800 crore auto loan market whereas the remaining amount is being lent by the private banks. Earlier a year ago the private banks were the leader of the auto loan market with a joint market share of 75-80%.

The loans offered by the PSU banks are largely in the range of up to Rs 3 lakh and are thus lending to two-wheelers in addition to smaller cars like Alto, WagonR, Santo and Indica.

Hyundai Motor India senior vice-president (sales & marketing) Arvind Saxena notify, "PSU banks are offering lower interest rate and so customers are opting for them. Secondly, these banks restrict their ticket size of loans and thereby mostly finance small cars, which form around 76% of the total auto market. Besides they have a wide reach in small cities and rural areas where there is growth."

Although PSU banks have become the higher lenders in the auto segment then also the HDFC Bank is maintaining its lead as the single largest player in auto loans with 30% market share. But the sharp reduction done by other private banks such as ICICI, Kotak Mahindra and Axis has brought down the share of private banks considerably over the past few months.

Till early 2008 ICICI bank held the position of market leader in auto loans later it significantly cut down the lending. ICICI Bank's Head vehicle finance N R Narayanan told, "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."

According to General Motors vice-president (marketing & sales) Ankush Arora, "Competitive interest rates and easy lending being offered by PSU banks has increase their share. For instance, the share of cars financed by SBI alone has now gone to 15 % for our cars from mere 2% of last year."

Syndicate Bank has just made an entry into the auto financing and initially it has recently entered the auto finance market in the initial stage has kept a portfolio of Rs 1,000 crore for auto finance. Syndicate Bank general manger (Retail Banking) B R Pai notifies, "Auto loan forms a small component of our total consumer finance portfolio of Rs 20,000 crore, but we will increase it subsequently.

We are offering one of the most competitive interest rate of 12% to our priority customers like Hyundai Motors and aim to grab a market share of 10% in the next few years."