Curbs in states have crimped economic activity.(Mint file photo)
Curbs in states have crimped economic activity.(Mint file photo)

Covid 2.0: Vehicle financiers may see nearly 7% increase in NPAs

  • Vehicle financiers say, however, that this year is comparatively better than 2020, when collections plunged to 10-15% due to the lockdown.
By Malayaban Ghosh, Gopika Gopakumar, Hindustan Times, Mumbai
PUBLISHED ON MAY 31, 2021 07:51 AM IST

Vehicle financiers in India may see a 5-7% increase in non-performing loans as the second wave of the pandemic worsens the financial health of their customers, industry experts said.

Incomes of fleet operators have taken a severe hit as strict lockdowns in the states have crimped economic activity, adding to an increase in operating costs, the experts said.

“There are emerging trends of extension of loan tenors by vehicle financiers to reduce servicing burden for borrowers. All vehicle segments would be impacted by the pandemic as it gets widespread, hindering business activity and thus affecting borrowers’ cash flows. Demand recovery would not be similar to the previous first wave as pent-up demand has been absorbed, and people would be cautious for subsequent waves,” credit rating agency India Ratings said.

Vehicle financiers say, however, that this year is comparatively better than 2020, when collections plunged to 10-15% due to the lockdown.

“In April this year, collections were around 70% since there was business in the first half and in May, it’s down to 60% since the agriculture sector has done well. Vehicles like buses, three-wheelers, carriers and heavy goods carriers and containers have been struggling,” said Ramesh Iyer, vice-chairman and managing director of Mahindra and Mahindra Financial Services Ltd.

Commercial vehicles (CV) makers remain hopeful that demand will return once the situation comes to a normal.

“The underlying dynamic of the CV sector has improved, though, with the new investment in infra projects, easing of financing norms and scrappage policy announcement,” P. Balaji, chief financial officer at Tata Motors Ltd, said.

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