Automobile dealers feel squeeze as norms for loans get tightenedhttps://indianexpress.com/article/business/automobile-dealers-feel-squeeze-as-norms-for-loans-get-tightened-5862270/

Automobile dealers feel squeeze as norms for loans get tightened

In a letter to Hyundai, SBI had communicated it has reduced the credit period from 90 days to 60 days, with a 15-day grace period to pay back a loan.

 SBI, SBI bank, SBI loans, auto sector, auto industry, Indian express
Emails sent to Hyundai Motor India and Maruti Suzuki did not elicit a response till the time of going to press.

Come October, some dealers of Hyundai Motor India may need to furnish collateral of anywhere between 25 per cent and 50 per cent of the loan amount taken from State Bank of India, depending upon the lender’s internal rating.

However, there are dealers who have already furnished the collateral at the time of renewing their loans or getting them enhanced. An SBI circular dated March 27 noted that dealers would need to provide a minimum 25 per cent or 50 per cent of collateral security based on a rating obtained when the loan was renewed or enhanced or a period of six months, whichever was earlier.

The collateral can be an immovable asset, fixed deposits or specified securities. Earlier, lenders rarely asked dealers for any collateral. In a letter to Hyundai, SBI had communicated it has reduced the credit period from 90 days to 60 days, with a 15-day grace period to pay back the loan. Post the grace period, interest rate will be levied at the rate of 6 per cent compared with the 2 per cent levied earlier.

FE has seen a copy of the circular issued to Hyundai.

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The rules relating to dealer financing are understood to have been tightened for dealers of Maruti Suzuki. A senior bank executive said the terms were slightly different for Maruti. Sector experts noted the slowdown in the automobile industry and the closure of some 200 dealers has made lenders understandably cautious.

Emails sent to Hyundai Motor India and Maruti Suzuki did not elicit a response till the time of going to press. —FE