Last week the Reserve Bank of India (RBI) had a meeting with the small and medium enterprises to discuss about plans and measures that will ease financing woes of the sector. Working on this the RBI is expected to have a meeting with major automobile manufacturers later this week to have discussion on this same issue.
It is believed in the meeting the two sides will be also discussing on the reviewing repossession guidelines of vehicles in cases of default.
"We will seek some assistance for capital required for capacity expansions and working capital and also ask guidelines to be relaxed so that public sector banks can also hire agents," said Dilip Chenoy, director general, Society of Indian Automobile Manufacturers. "Besides we will urge RBI to quickly formulate guidelines for repossesion of vehicles during defaults without which the whole process of financing becomes untenable."
Earlier this year on the bases of the directives issued by the Supreme Court RBI had warned banks against the use of recovery agents in case of defaults. Therefore the private sector banks have become evasive in financing which has badly affected the industry.
Existing guidelines that forbid public sector banks from employing agents is also likely to be discussed in the meeting.
As the private sector banks are becoming cautious and inflexible in financing cars and two wheelers, public sector banks are offering 100 per cent financing for vehicles. Although an inability to hire agents is, a stumbling factor in the process.
"Private Banks are hiring their own agents who are present at the dealership and that is the way auto financing is done traditionally. Unless public sector banks function in a similar format, their entry into the segment will be limited and consumers will not be benefited," said a Maruti official who did not wish to be named.
In November automobile sales has dropped by 18 per cent year on year largely on the back of continual lack of retail finance.
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