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Lenders put brakes on two-wheeler finance

Financiers have put a brake on the finance of two-wheeler

Apnaloan.com Research Bureau

29 Jan 2008

Leading lenders like ICICI Bank and HDFC Bank have raised the down-payment on two-wheeler finance to 30 per cent and tightened lending norms. This comes in the wake of a huge increase in payment defaults. The defaults have shot up from 1 per cent to nearly 2.5 per cent in the last few months.

As reported by Business Standard, ICICI Bank has curtailed lending in some specific areas like Uttar Pradesh and Maharashtra. The bank has also curtailed lending to some specific profile of buyers.

With interest rates shooting up to 24 per cent from 18-19 per cent, delinquencies have been on the rise.

Finance companies are also talking of more discipline on the part of dealers. According to them, some sub-dealers have turned too aggressive and are selling two-wheelers with temporary registration. There can be no hypothecation without proper registration. As a result, such loans will be classified as unsecured loans. This, in turn, means that any further provisioning has to be done in accordance with RBI guidelines for unsecured loans, not loans where property is hypothecated.