By Shashank Didmishe
The expansion in automobile loans issued by the banks continued on a downward trajectory in Could as semiconductor shortages weighed on manufacturing which additionally impacted gross sales. Banks’ automobile loans excellent as on Could 31 was at Rs 4.2 trillion, which was up by 1.2% month-on-month. The expansion within the automobile section has slowed for 2 consecutive months, in keeping with the newest Reserve Financial institution of India (RBI) information.
In April, automobile credit score excellent grew by 2.7% on month. In distinction, banks’ automobile mortgage portfolio improved by a sturdy 22.2% on-month in March and 17.1% in February.
“The semiconductor scarcity nonetheless persists and has impacted the unique gear producers’ (OEM) skill to satisfy demand,” H T Solanki, basic supervisor of mortgages & different retail belongings at Financial institution of Baroda stated. Whereas expressing the identical view, Krishnan Sitaraman, senior director and deputy chief rankings officer of CRISIL Scores stated that the semiconductor scenario is unquestionably bettering and that’s starting to be mirrored within the volumes.
Gross sales of passenger automobiles declined sharply by practically 10% month-on-month in April and marginally by 0.2% month-on-month in Could. With this fall on a month-on-month foundation, the gross sales of the passenger automobile section remained beneath the 2018 degree in Could, in keeping with Society of Indian Vehicle Producers (SIAM).
Banks have 70-75% market share in passenger automobile loans as it’s an rate of interest delicate section, however have a decrease share of round 40% within the business automobile (CV) mortgage section. “Therefore, progress developments in automobile loans within the banking sector are extra pushed primarily by what occurs within the automobile mortgage section,” Sitaraman stated.
Moreover, pent-up demand for automobile loans might have led to February and March posting increased mortgage excellent within the section and there may be the standard yr finish push from lenders in March which offers tailwinds to volumes on the finish of a monetary yr, Sitaraman stated.
Automobile loans kind a significant chunk of the private mortgage portfolio of the banking sector, contributing 19% of the entire private loans. Private loans, that are at present driving the entire credit score progress for banks, represent greater than 25% of the entire financial institution credit score excellent, RBI information reveals.
Regardless of the slowing progress within the automobile mortgage section, there are expectations of banks’ automobile loans regaining momentum. Financial institution of Baroda expects the upcoming festive season to be a powerful one. In Q3FY22, the lender posted 19.5% on yr progress in its auto mortgage e-book. With the decision of provide facet points and a few new launches within the pipeline, Sitaraman expects a structural shift driving automobile gross sales and demand for finance.