According to ICRA Ltd, an independent credit rating agency, by March 2022, the Passenger Vehicle loan segment is expected to grow at 16-17% CAGR to Rs.6.5 trillion. The passenger vehicle (PV) finance portfolio was Rs.3.1 trillion as of 31 March 2017. Over the next 5 years, the rise in CAGR of the PV credit segment will be mainly due to the increase in customer preference for high-end vehicles, expanding financial penetration, and the increase in Passenger Vehicle sales volume and realisation growth.
Bank Passenger Vehicle Loans
The overall bank and non-bank financial company (NBFC) passenger vehicle loan segment grew at a compounded annual growth rate (CAGR) of 18% and 12%, respectively from April 2014 to March 2017. Bank PV loans share grew from 65% in March 2014 to 70% in March 2017. The growth was mainly due to the low interest rates offered by banks (in an effort to defeat competition) to lure more borrowers to the passenger vehicle loans segment.
NBFC Passenger Vehicle Loans
As for the NBFC PV loans, the foreign OEM captive (FOCs) financiers, the CAGR was 35% during March 2014 to March 2017. The NBFC segment increased its overall PV credit share by 200 bps (basis points) during that period. With many Original Equipment Manufacturers (OEM) making their presence known in the country, the FOCs were able to increase their share in OEM sales to around 15-25% over a period of 3 to 5 years, owing to the easy access to funds at attractive interest rates. The FOCs are expected to expand their retail passenger vehicle portfolio by 18-20% in the future. They will certainly hold their own against the estimated 10-12% growth in the overall NBFC Passenger Vehicle loan segment.