In a double whammy for two-wheeler makers, whose sales fell nearly 8 per cent in April-December last year, leading financiers have put their products in the high-risk category. The consequences have been dire.
Leading outfits like ICICI Bank and HDFC Bank have raised the down-payment to 30 per cent -- earlier there were schemes against a down-payment of just Re 1 -- and tightened lending norms, with the result that their exposure to two-wheelers has fallen nearly 20 per cent so far this financial year.
Besides, finance companies are also trying to enforce belt-tightening at dealer outlets.
"We have curtailed lending in some specific areas like Uttar Pradesh and Maharashtra and also to some specific profile of buyers to bring the overall exposure in the market down by 19-20 per cent," said N R Narayanan, Head of auto loans at ICICI Bank.
With interest rates shooting up 24 per cent from 18 to 19 per cent a year ago, delinquencies have been on the rise. Payment defaults by two-wheeler buyers have shot up from 1 per cent to nearly 2.5 per cent in the last few months.
"We are not in the business of charity. What we have done is just portfolio correction. Calling it 'pulling back' is not correct. This is a decision taken purely on commercial considerations," said Ashok Khanna, Executive Vice-President and Business Head, car and two-wheeler loans, HDFC Bank.
Indians buy nearly 7.5 million two-wheelers every year, of which over half are financed by banks and other lending agencies. Of this, ICICI Bank alone accounts for half, while HDFC Bank bankrolls 28 per cent.
The finance companies are also talking of more discipline by dealers. According to them, some sub-dealers in some prominent markets had turned too aggressive, selling two-wheelers with temporary registration.
"Without proper (read permanent) registration, we have no hypothecation, which means our loans are classified as unsecured lending and provisioning has to be done in accordance with the RBI guidelines," Khanna pointed out.
