RBI, auto industry to discuss consumer loans | india | Hindustan Times
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RBI, auto industry to discuss consumer loans

The RBI is expected to meet major automobile manufacturers later this week to deliberate on measures that will ease financing woes of the sector, reports Sumant Banerji.

india Updated: Dec 15, 2008 21:27 IST
Sumant Banerji

After meeting small and medium enterprises last week, the Reserve Bank of India (RBI) is expected to meet major automobile manufacturers later this week to deliberate on measures that will ease financing woes of the sector.

The two sides will also discuss on reviewing repossesion guidelines of vehicles in cases of default.

"We will seek some assistance for capital required for capacity expansions and working capital and also ask guidelines to be relaxed so that public sector banks can also hire agents," said Dilip Chenoy, director general, Society of Indian Automobile Manufacturers. "Besides we will urge RBI to quickly formulate guidelines for repossesion of vehicles during defaults without which the whole process of financing becomes untenable."

Based on a directive from the Supreme Court, RBI had warned banks against the use of recovery agents in case of defaults earlier this year. This had resulted in private sector banks becoming cagey in financing and that has impacted the industry.

A review of exisitng guidelines that forbid public sector banks from employing agents will also be discussed.

With private sector banks becoming cautious and inflexible in financing cars and two wheelers, public sector banks have come forward offering even 100 per cent financing for vehicles. The inability to hire agents is, however, a stumbling block in the process.

"Private banks have their own agents who are present at the dealership and that is the way auto financing is done traditionally. Unless public sector banks function in a similar format, their entry into the segment will be limited and consumers will not be benefitted," said a Maruti official who did not wish to be named.

Automobile sales in November slumped by 18 per cent year on year largely on the back of continual lack of retail finance.