The news of an economy getting slowdown in the future has made banks and financial institutions cautious of giving out consumer loans. This year consumer lending has come down by 10-15% during the pre-festive period as against last year.
Afraid of getting burdened with non-performing assets (NPAs) later, some FIs decided not to give out consumer loans a couple of months back. The slowdown in consumer lending has already affected the auto and two-wheeler sector.
R Narayanan, head of auto loans at ICICI Bank, pointed out that the market sentiment was almost subdued and there was "nothing much exceptional'' considering there were Navratras, Dussehra and Diwali in October.”We were expecting a mega month. But the market is not bullish,'' he said.
The banks are finding financing costlier and tougher due to liquidity crunch. Moreover the caution adopted by financers in terms of customer profile, is coupled with higher interest rates, which has made things difficult.
Narayanan added due to a variety of negative factors, the overall market seems to be "in a state of shock'' and also stated that people who normally replaced cars or upgraded to luxury vehicles in the festive period have now adopted a wait-and-watch policy. "There is hardly any festivity right now in the auto sector,'' he said, stating about the mood of the market.
However in the absence of loans consumers doing purchasing with credit cards. This is true for consumer durables, including white goods.
Nikunj Sanghi, a dealer of Mahindra and Hero Honda at Alwar in Rajasthan, said the market is moving slower than expected. "As a result of this, the inventories that we carry are huge.''
He held the "virtual pullout'' by finance companies from two-wheeler loans responsible for the poor show.” He added two-wheeler sales compared to the same period last year are estimated to be down by as much as 50%,''.
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