‘CV financing demand to sustain, expect customers to absorb high interest rates’

While the rising inflation in isolation gained’t have a direct impression on demand for both passenger or business automobiles (CVs) or two-wheelers, a reasonable slowdown within the tempo of development within the financial system has the potential to maintain demand for purchases muted, says Umesh Revankar, vice chairman & managing director, Shriram Transport Finance Company (STFC), the most important business car lender within the nation.

“Used vehicle demand has picked up, given the subdued purchasing power for new vehicles. The commodity price inflation is leading to higher vehicle prices for both new and used vehicles,” Revankar stated, talking to The Sunday Express.

On the impression of rising rates of interest, he stated charges alone can’t dent demand for car financing. “Demand for CV financing has improved in the last four months. We expect the demand momentum to sustain in FY23. Higher infrastructure spending is driving demand for newer vehicles and equipment especially in earth moving activities. Macro trends have been positive and with normal monsoons and a good harvest, we expect that our customers will be able to absorb higher interest rates,” Revankar additional stated.

He famous that mild CVs (LCVs) are doing effectively on the again of a surge in e-commerce and higher last-mile connectivity, including, “The demand for LCVs is likely to increase, as the logistics and e-commerce industries are growing rapidly.” LCVs largely cater to the motion of agricultural produce, e-retail, prescribed drugs and shopper staples, and are exhibiting resilience.

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Additionally, as a consequence of fast urbanisation and digital disruption, there are steady new retail and e-commerce platforms, which require environment friendly logistics, resulting in the expansion of the LCV market and thereby driving demand for LCV loans.

“At STFC, our small and light CV portfolio loan book has grown from 19 per cent to 27 per cent of the AUM in the last four years and stood at Rs 34,600 crore as of March 2022,” he stated.

On the tightening of NBFC guidelines by the RBI, Revankar stated NBFCs have traditionally loved a regulatory arbitrage versus banks and within the final three years, a variety of that has gone away.

“Despite the altering regulatory framework, the NBFC sector nonetheless enjoys some advantages by way of flexibility, product improvements, geographic enlargement and resource-raising potential. NBFCs have been capable of take the altering rules of their stride and I consider enhanced supervision, higher regulation, transparency and accountability are within the long-term constructive for the sector.

“In FY23, with the improving macro-economic situation, the rural sector in revival mode, normal monsoons and infra spending kicking in, we expect asset quality to further improve.”

Covid led to non-deployment of belongings in sure segments and geography. As the scenario returned to normalcy, lots has improved and lenders have managed to progressively pare down their confused loans, step by step within the final three quarters, with an enchancment within the financial cycle, Revankar added.

He additionally dominated out any plan to use for a business financial institution license. “We prefer to be an NBFC. Our customer base is unbanked and under-banked and to serve my customers better I need to be nimble-footed and understand my segments.”