MUMBAI: The NBFC crisis and the resultant tight liquidity conditions were taken as one of the reasons for sliding auto sales, but the experience in the last six months have shown that the slowdown is real. Also, other factors including a sluggish manufacturing and rural demand slump have contributed to the fall in overall auto sales.
State Bank of India’s chief economist Soumya Kanti Ghosh, in a paper released on Tuesday, has given 30 per cent weightage to the NBFC (non-banking finance companies) factor, the highest among the factors, for decline in auto sales. “NBFCs were the major financers for customers who do not approach banks; hence, revival of lending by NBFCs is also critical,” Ghosh said.
The Finance Industry Development Council (FIDC) data showed that NBFC credit fell 31 per cent in the March quarter to `1.96 lakh crore compared with `2.83 lakh crore in the previous year, with auto, agriculture and MSME segments registering record fall.In the order of weightage, rural demand, proxied by rural wages, stood at 20 per cent; revised axle norms 10 per cent; higher insurance cost 10 per cent and other factors such as a jump towards second-hand car market, car rentals and EV policy at 20 per cent, the research report showed.
“We were trying to brush aside issues, thinking that the NBFC crisis, the liquidity issue, was leading to lower vehicle sales. The crisis still exists, but the banks are willing to lend; there are some strong NBFCs not hit by the crisis. Truck sales are the bellwether of the economy. Unless manufacturing activity picks up, nothing is going to change soon,” said Senthil Kumar, head of commercial vehicle business, Manappuram Finance.The liquidity crisis also led to mutual fund exposure to the NBFC sector coming down from `2.66 lakh crore in July 2018 to `2.02 lakh core in June 2019.
We were trying to brush aside issues, thinking that the liquidity issue, was leading to lower vehicle sales. The crisis still exists, but the banks are willing to lend; there are some strong NBFCs not hit by the crisis
Senthil Kumar, head of commercial vehicle business, Manappuram Finance