Public sector banks go on a two-wheeler ride

The liquidity crunch in the financial sector and high operating expenses have got private sector banks backing off from two-wheeler financing, reports Sumant Banerji.

The liquidity crunch in the financial sector and high operating expenses have got private sector banks backing off from two-wheeler financing, and their public sector counterparts are filling the space they vacate.

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"We had already stopped operating out of auto dealerships and are concentrating only on our existing customers. Since that is not a segment where there are potential buyers, sales have dipped considerably," said N Ravi Narayanan, head, vehicle finance, ICICI bank. "We found that the traditional way of financing was not viable as operating expense was too high. If we find that even in the current format expenses are high, then we may exit altogether."

In a sector where over 80 per cent of vehicles are financed, companies are left with no option but to cosy up to traditionally sceptical public sector banks.

"We have found public sector banks more forthcoming vis-a-vis private sector which has become very stringent," said Atul Gupta, vice president, sales and marketing, Suzuki Motorcycles India. "Some of the private sector banks like ICICI Bank stopped disbursing loans since September."

Bajaj Auto is strengthening its own finance arm Bajaj Auto Finance. Marketleader Hero Honda has tied up with a number of regional rural banks to tap that market.

"We already have a tie up with Syndicate Bank and are in talks for tie ups with three other public sector banks," Gupta said.

Motorcyle sales grew 6.59 per cent in April-October this year, while scooter sales grew by 6.79 per cent.