Commercial vehicle lenders feel the heat of slowing economy
02 Nov 2013
Edition: Page 10
A slowdown in commercial vehicle (CV) sales and a rise in the number
of such loans going bad have forced banks to pull back on their CV
Private banks, including HDFC Bank and Kotak Mahindra Bank, along
with NBFC players like Shriram Transport Finance have all reported
slower growth in CV advances in the July-September quarter, with
bankers suggesting they would remain cautious about offering such
loans in the near future.
HDFC Bank, which held a commercial vehicle and commercial equipment
(CE) loan portfolio of Rs 16,956 crore as on September 30,
acknowledges a rise in the non-performing assets in this segment.
However, the bank also says most of these are genuine cases of stress.
“These are just customers who managed to survive the initial stresses
in the economy for a long time. Obviously, as things have not improved
and have continued to face stress in the demand and delayed payments,
some of them have become non-performing. This is actually a reflection
of the market condition for their businesses rather than customers who
are willful defaulters,” Sukhthankar had said during the bank’s
announcement of its Q2 results.
According to a report by credit bureau Equifax Credit Information
Services the numbers of CV loan accounts that are more than 30 days
outstanding that have turned delinquent has increased to 13% from 11%
in the first half of 2013. In absolute terms, the number of loans that
are outstanding for more than 30 days increased to 3.07 lakh in June
2013 from from 2.24 lakh in December 2012.
Equifax’s database has about 400 institutions of which 125 are
microfinance institutions. At Kotak Mahindra Bank, the size of CV/CE
loan book came down from 12% of the total loan book to 10% at the end
“The delinquencies are not increasing at the same pace as they were
in the past. We will review whether we need to grow it back again. For
now, the brakes are on,” said Dipak Gupta, joint managing director at
Kotak Mahindra Bank.
Shriram Transport Finance, an NBFC player in this market, has also
seen a slowdown in disbursals along with an increase in delinquencies.
This was one reason why the company reported a 3% drop in its net
profit to Rs 326.83 crore for the quarter ended September 30 2013.
“Overall there is a delay in payments and it may continue for the
next 2-3 quarters. We may not grow our loan book aggressively in the
coming quarters,” said Umesh Revankar, MD, Shriram Transport Finance Company.
While stress in the CV portfolio of banks is starting to show up,
warning signs were visible even earlier in the year. “Delinquencies in
CV loans are increasing, with monthly collection ratio of Crisil-rated
commercial vehicle pools dropping below 95% for the first time since 2009.
This decline indicates borrowers are increasingly delaying
repayments,” Crisil had said in a report in April.
N Sivaraman, president and whole time director at L&T Finance
Holdings is hopeful there could be a turnaround in the next two
quarters, which might help the CV/CE segments.