PSU BANKS CHASE AUTO LOANS

 Public sector banks, which have witnessed credit demand drying up in the wake of economic slowdown, are looking at the automobile portfolio to boost lending and meet their increased credit growth target. Until now, this portfolio was primarily being serviced by private sector banks and non banking finance companies (NBFCs).

Traditionally state owned banks have stayed away from this segment. This is the new segment for us and it would help boost credit growth for public sector banks, JM Garg, chairman and managing director, Corporation Bank told Hindustan Times.
Automobile majors are finding the going tough with private banks and NBFCs reducing their overall lendings. Several banks, including State Bank of India and Punjab National Bank, have already announced a reduction in car loans.

While PNBs interest rate on auto loans is between 10.50 per cent and 11.00 per cent, SBI has frozen car loans at 10 per cent for a period of one year. Bank of Baroda has struck memorandum of understanding with auto majors Maruti Suzuki and Ashok Leyland to facilitate car financing.

With the latter, the bank has joined hands to finance commercial vehicles without collaterals. MD Mallya, chairman and managing director, BoB, said that this move would facilitate auto loans. With GDP growth dropping to 5.3 per cent during the third quarter in the current fiscal, there is pressure on PSU banks to increase lending to boost growth. Senior bankers said that the auto loan portfolio would enable lenders to meet credit growth target in 2009-10.