Chennai: Truck financiers have found new ways to beat the slowdown and reduce bad loans on their books. Many of them have begun offering loans against property.

Hinduja Leyland Finance, the loans division of truck maker Ashok Leyland, began to give loans against property in the second half of FY 2014-15. “Diversification helps reduce the risk and seasonality tied to truck finance," said S. Nagarajan, managing director of Hinduja Leyland Finance.

The Chennai-based company’s assets under management stood at 6,300 crore as of 31 March, with 5% of the pie constituting property loans. Its quantum of bad loans were at 3.2% in fiscal 2015, compared with 2.9% the previous year.

Another Chennai-based truck financing company, Cholamandalam Investment and Finance Co, has grown its loans against property portfolio to 30% of total loans in the past seven years. In 2014-15, the company’s total disbursals grew by 2,200 crore to 25,450 crore. “A bulk of the growth came from loans against property, which bring stability to the company’s [Cholamandalam’s] portfolio although the yields are lower," said an analyst who tracks Cholamandalam but did not want to be named. In fact, close to 65% of loans disbursed in the fiscal year were for property purchases, with the remaining going to trucks and small enterprises.

The company’s bad loans rose to 3.1% from 1.9% the previous fiscal. But analysts who track non-banking financial companies were of the view that the quantum of bad loans could have been higher if not for the loans against property, considered a far less riskier option than truck loans. Besides, Cholamandalam has brought down the period for recognising a non-performing asset (NPA) from 180 days to 150, a year ahead of the Reserve Bank of India’s (RBI) deadline for doing so. In 2014, RBI had stipulated that NPA recognition period would be gradually reduced—starting with 150 days in March 2016, 120 days in 2017 and, finally, 90 days in 2018.

But not all truck financing companies have embraced diversification of their loan portfolios. The country’s largest such financier, Shriram Transport Finance Ltd, only gives loans for purchasing used and new trucks.

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