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Banks set to see rise in commercial vehicle loans
MUMBAI: Banks are set to witness growth in commercial vehicle (CV) loans from the second half of the current fiscal (2016-17), with likely pick-up in economic activity
MUMBAI: Banks are set to witness growth in commercial vehicle (CV) loans from the second half of the current fiscal (2016-17), with likely pick-up in economic activity in mining and road projects and decline in diesel prices driving the rise.
The overall CV segment grew 12.9% in April-June 2016, compared to 3.5% in the same period last year. Medium & heavy CVs expanded 14.5%, from 23.3% a year ago, while light commercial vehicles (LCVs) grew 11.9%, against a -7.3%, according to the Society for Indian Automobiles Manufacturers (SIAM).
CVs are used by truck and transport operators. Ashok Leyland, Tata Motors, M&M and Eicher are the leading players in the segment. The companies have been facing cash-flow troubles in the past two years due to stalled projects, leading to low demand.
After a two-year lull, the rising demand for CV loans points to an economic revival, experts said.
“Growth in the segment had slowed down in June versus April and May; This is a seasonal issue. We expect volumes to remain similar in the second quarter, and a pick-up in the third or fourth quarter,” said Romesh Sobti, MD and CEO of Indus Ind Bank.
IndusInd Bank, part of the Hinduja group, is one of the top players in the CV loan segment, which makes up for 15% of the bank’s retail loan book. It grew 16% in the first quarter, against an industry growth of 14%.
Kotak Mahindra Bank, another significant player in the CV loan segment, saw its loan book decline in the past two years — from₹7,805 crore in March 2013 to ₹5,204 crore in March 2015. It, however, rose to ₹7,463 crore in March 2016. The bank is expecting the CV segment to grow further in the coming quarters.
Besides, M&M’s truck and buses division also aims to double its marketshare in the heavy CV space in the coming two years.
