Industry urges PM to ensure retail finance in auto sector

NEW DELHI: Industry has urged Prime Minister Manmohan Singh to bring about some fundamental changes in the process of repossession of vehicles from loan defaulters to make the exercise easier, so as to encourage banks and other lenders to extend retail finance in the automotive sector.

"Unless there is a structural change, which allows banks to repossess vehicles on which outstanding are there, banks would not be willing to come forward and lend. And that (point) was made very strongly (to the PM)," CII President Venu Srinivasan said, who met the Prime Minister on Saturday.

Srinivasan, who is also the Chairman of two-wheeler major TVS Motor Co, said as court strictures regarding repossession of vehicles have already been passed, structural changes allowing banks to repossess vehicles is needed.

Auto industry has been asking for clearcut guidelines on who and how a vehicle could be repossessed. Under the current system, non-banking financial institutions are not covered under the current RBI's guidelines.

Many banks had either scaled down or withdrawn from vehicle financing as recovery and repossession from defaulters became a problem. Lack of retail financing had hurt the Indian auto industry. Sales had fallen in the second half of the last year, only to slowly pick up in the beginning of this year after announcement the two stimulus packages in December and January.