Auto loans: outstanding auto loans hit a new high in FY21

CHENNAI: Despite the disruptions caused by Covid-19 to auto sales, the 2020-21 fiscal year saw a sharp increase in outstanding auto loans in bank books.
According to the latest data from the Reserve Bank of India, outstanding auto loans from banks hit a new high of Rs 2.39,400 crore in FY21 through February 26, an increase of 8.5 % compared to Rs 2,20,600 crore at the end of fiscal 20..
The gradual growth in auto loans at Rs 18,800 crore in the first eleven months of FY21 was greater than the growth of the loan portfolio in the other years except FY18, when loans automobiles increased by Rs 19,300 crore. It was Rs 17,600 crore in FY17, Rs 12,400 crore in FY19 and Rs 18,400 crore in FY20.
Auto financiers say there are several reasons behind this growth. “It could be a combination of factors, including larger loans, especially in passenger vehicles, combined with the moratorium on loans and aggressive restructuring of banks,” said Vyomesh Kapasi, director. General of Kotak Mahindra Prime. All these elements would have an impact on the outstanding loans for vehicle financing.
About 80% of cars and SUVs in India are financed and almost 100% of commercial vehicles are purchased on credit. Two-wheelers have 50% to 60% lower penetration.
Financiers say the pinch in the portfolio during the year also prompted clients to opt for longer terms and a smaller cash down payment.
“In a year of declining wages and economic hardship, more expensive models like SUVs did better, discounts were reduced and the amount of the loan ticket increased as a result. Customers have switched to 90% financing, especially in passenger vehicles, and cash purchases have declined, which previously accounted for around 10-15% of sales, ”said Ramesh Iyer, Managing Director of Mahindra & Mahindra Financial Services. The penetration of vehicle financing has also increased overall with the take-off of tractor financing.

The increase in loan disbursements was also reflected in the size of the ledger.
According to Indian Bank, for example, loan disbursement increased to Rs 1,130.52 crore in FY21, from Rs 974 crore in FY20.
“The disbursement in the middle segment (Rs 5-Rs 10 lakh) was more which led to the disbursement of the vehicle loan for the year FY21,” a bank spokesperson said. The average vehicle loan ticket size increased to Rs 5.43 lakh in FY21, compared to Rs 5.31 lakh in FY20.

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