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 loan portfolios.
Private banks, including HDFC Bank and Kotak Mahindra Bank Ltd, along with NBFC players like Shriram Transport Finance Company Ltd 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 banks 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.
Equifaxs 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 of Q2.
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 R326.83 crore for the quarter ended September 30 2013.
Overall there is a delay in payments and