Taking into consideration many factors including the liquidity crunch exist on the car sector, the State Bank of India (SBI) has reportedly tightened lending terms for auto dealerships, a report by NDTV points out.
News agency Reuters also revealed the same report based on internal memo sent by banks to various financial dealers. The auto sector in the midst of a sharp downturn and India’s largest lender wants to reduce its exposure to risk from this sector. The liquidity crunch in non-bank financing, higher insurance costs and rises in taxation have served to increase the pressure on the car sector. And the statistics pegs a monthly downturn in auto sales by 17-20 per cent since April.
In one internal memo for financing dealers selling vehicles made by Hyundai Motor's India unit, SBI said it is revising the lending terms because of "growing stress" in the carmaker's portfolio.
"There is an auto sales slowdown and we have substantial exposure to autos. We want to stay safe and this was done to mitigate risk and protect us," said the SBI official, who asked not to be named because the details had not been made public.
SBI's loan exposure in the auto retail market was 718.8 billion rupees ($10.5 billion) at the end of March, according to regulatory filings.