Auto finance majors tighten purse strings

NEW DELHI: Call it slowdown shivers. The demand derail in the auto industry is prompting the big boys of auto financing to cut back their exposure in the market. The cutback includes both lending to car/bike/truck buyers as well as to dealers.

This translates into smaller loan coverage , fewer vehicles financed in certain markets, rollback of footprint in the hinterland (which includes cities like Kanpur, Lucknow and Allahabad, for instance, in addition to the North East and certain pockets in central and east India) and a greater focus on metro markets and premium vehicles, where risks are lower.

Sources say this new creamy-layer focus could also make financiers lukewarm to the Tata Nano when it debuts this October. "Given the number of defaults and the current credit environment , it's a very high-risk segment," said a senior executive with one of the big three auto financiers.

According to sources in the industry, ICICI, the biggest player in the auto loan business, has "rejigged its portfolio" to cut back exposure in "high-risk segments" . Others like Kotak have turned "cautious" as defaults increase. As big financiers pull back their non-creamylayer footprint, the focus now is back to metro markets and low-risk customers.

ICICI sources say it's reduced geographical spread is part of a portfolio management strategy which examines locations and creditor profiles for profitability . "But with the interest rate increase and growing number of defaults, the mix and match is changing, with more exposure in premium segments and cutting down on delinquent locations or profiles," said a company source.