As part of the revised terms, the country's largest bank by assets has decided to halt lending to dealers of Hyundai Motor India unless they provide a minimum of 25% collateral.
State
Bank of India (SBI) has tightened lending terms dramatically for
auto dealerships, according to a source and an internal memo seen by
Reuters, seeking to reduce its exposure to risk from a sector in the
midst of a sharp downturn.
The
shadow banking crisis that began to unfold in India during mid-2018
has deepened this year. The liquidity crunch in non-bank financing,
higher insurance costs and rises in taxation have served to increase
the pressure on the car sector, with monthly auto sales falling by
17-20 per cent since April.
Monthly
passenger vehicle sales in June fell by the biggest margin in 18
years.
In
one internal memo for financing dealers selling vehicles made by
Hyundai Motor Co's India unit, SBI said it is revising the lending
terms because of "growing stress" in the carmaker's
portfolio.
Similar
memos have been sent to dealerships for all other brands, said a
senior SBI official aware of the matter, though Reuters has not seen
memos relating to other carmakers.
As
part of the revised terms, the country's largest bank by assets has
decided to halt lending to dealers of Hyundai
Motor India unless they provide a minimum of 25 per cent
collateral, it said in the memo.
Hyundai
dealers that had already received loans from the bank will also have
to provide security of between 25 per cent and 50 per cent of the
loan amount, SBI said in the memo dated March 27 and signed by the
chief general manager for supply chain financing.
Hyundai
did not immediately reply to an email seeking comment outside
business hours.
The
company is India's second-largest carmaker with more than 16 per cent
of a market accounting for 3.3 million passenger vehicles in the year
to March 31.
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