Click to play videoNew Delhi: Finance companies have been avoiding vehicle financing as it is next to impossible for them to repossess the asset following a Supreme Court order in 2007.
The SC had come down heavily on banks and finance companies following protests against the strong-arm tactics used for recovery of vehicles.
Industry experts say the average default rate is between 20-25 per cent and with little room for repossession, banks started to withdraw from vehicle financing as the business fetched them low margins.
This had a negative impact on the growth of two-wheelers in 2007-08 with interest rates shooting upto 22-24 per cent from an earlier 16-18 per cent.
Coupled with a slowing market, the auto industry is now looking for relief. It wants the RBI to come out with a clear set of vehicle repossession norms.
MD, Hero Honda, Pawan Munjal said, “Banks are cautious while lending to two-wheeler consumers. Their issue is that when they have defaulters they cannot approach the defaulter to get back the asset or the money. If they do that then the defaulter could call the police on grounds of harassment.”
While Senior VP, Sales and Marketing, Hyundai Motor India, Arvind Saxena said, “The norms have to be finalised between finance companies, banks and the Government. Something positive should come out.”
The society of automobile manufacturers along with the Finance Industry Development Council has put together draft guidelines which hope to address the issue of repossession, storage and resale. The proposed norms suggest stricter ‘know your customer’ norms for vendors and repossession agents.
Financiers are agreeable to follow the directives of the Delhi High Court while taking custody of assets which include repossessing only stationary vehicles and due intimation to the law enforcement agency.
These guidelines have been sent to the department of industrial policy and promotion.
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