Customers throng public sector banks for vehicle loans

Earlier customers used to flock the private banks for getting vehicle loans but now the customers are visiting public sector banks for vehicle loans. The reason for change in approach of the customer is not only the low interest rates but also the easy operations and transparency.

For instance Mr Sanjay Mukherjee, a government employee based in Kolkata has recently bought a four wheeler for which he applied for loan with United Bank of India and in couple of hours his loan was sanctioned and also charged lower interest rate than that is offered by many private banks.

An anonymous customer of State Bank of India told, “In the case of a public sector bank, we can directly deal with the branch manager or the bank employee who is well versed with the various schemes, whereas in the case of private banks, it is the intermediary, usually an agent who has very limited information”.

As per analysis report by Crisil Research over the last one year there has been increase in the market shares by more than 10% which has impacted the approach of the customers and prefer public sector banks for loans.

Mr Manoj Mohta, Head-Research, Crisil Research said, “Earlier, PSBs accounted for about 25-30 per cent of the total vehicle finance portfolio and private banks had 50 per cent share, but now the share of PSBs has moved up by more than 10 per cent to almost 40 per cent of the total finance in the sector.”

Mr Mohta stated in 2009-2010 the increase in vehicle loan can go up to 8-10 per cent due to strong foothold the public sector banks have and the growth in basic assets.

Previously PSBs gave loans to only their own customers or on a reference but now the PSBs are aggressively sanctioning vehicle loans and have also simplified the most of the clauses. Mr Tanuj S. Sandhu, Zonal Head-East, Honda Siel Cars India Ltd pointed out recently many of the PSBs have got into tie-ups with various manufacturers and the most important is the rise in the market share of the PSBs has given a strong base to the customers satisfaction in these banks.

Mr Sandhu added, “The PSBs have a greater reach in the eastern and northeastern regions, making them the natural choice for vehicle finance in these regions”.

He stated earlier PSBs’ had financed around 4-6 per cent of the total Honda vehicles financed, but now it has increased to more than 16 per cent.

In 2008-09 in the vehicle loan segment many of the public sector banks have reported 35-40 per cent growth and this year also these banks are expecting to attain a similar growth.

Mr Vijayendra, General Manager, Retail, Union Bank of India explained, “The growth usually picks up post-August and the momentum continues till January. We have witnessed a reasonable growth in the auto loan portfolio so far during this year”.

A senior official at a car manufacturing company pointed out, “Most of the PSBs have a wider reach and long association with their customers. They maintain a track record of their customers, which makes loan disbursal easier”.

Most of the private banks have almost stopped giving vehicle loans because of increase in the default rates. Moreover PSBs are not expecting any rise in their non-performing assets. Mr Mohta said in 2008-09 in car loan segment the gross NPA was 2.5-2.75 per cent which is expected to rise by 4-4.5 per cent in 2009-2010. He stated the rise in NPAs can be seen mainly due to the loans sanctioned in 2007-08 and in early months of 2008-09. “The recent origination might reflect lower NPAs partly due to tightening of the underwriting norms and reduction in interest rates.”