India’s largest lender State Bank of India (SBI) is extending loan repayment time for stressed automobile dealers by 15 to 30 days amid slowing car sales, a top bank official said.
“Normally, the repayment period is 60 days. So, we extend it to 75 days for some dealers and to 90 days for a few others," P.K. Gupta, managing director of SBI, told reporters.
The bank has an exposure of ₹11,500 crore to auto dealers.
Gupta said that currently, some automobile dealers are facing difficulty in repaying loans as per schedule.
“We are talking to each dealer and had meetings with all the industry majors and with the Federation of Automobile Dealers Associations (Fada). We are very actively engaged with all of them on a case-to-case basis. We have been working out solutions along with other banks for dealers facing problems on account of higher inventory," said Gupta.
He summarized the slowdown in the automobile sector as a problem of inventory piling up at dealerships amid falling car sales.
India’s passenger vehicle industry recorded its worst performance in nearly 19 years in July as sales fell 31% to 200,790 vehicles from 290,931 units a year earlier, showed data released by the Society of Indian Automobile Manufacturers (Siam).
“Our discussions with dealers’ associations suggest that the festive season is going to start soon and then they will be able to clear most of the inventory and most of the accounts may not turn into NPAs. But it will all depend on what kind of demand revival takes place," said Gupta.
Meanwhile, SBI on Sunday, like several other public sector banks, said in a statement that it has conducted sessions with officials starting from the branch level to chalk out a roadmap for reviving credit flow.
The flurry of meetings follows a nudge from the central government asking them to come up with suggestions on the future of the banking industry.
News agency PTI reported on Friday that the finance ministry has asked public sector banks to initiate a month-long consultation process with officers starting from the branch level to seek suggestions for streamlining banking and achieving a $5-trillion economy in five years.
Gupta said the consultation was conducted to review the performance of the bank on various parameters; to look at issues where the bank has done well and look at the areas where performance has not been up to the mark.
“The intention is a bottom-up approach. This conclave comprised branch managers all across the country and they were all overseen by the top management, starting from the chairman, the managing directors, deputy managing directors and chief general managers," he said.
Areas specifically looked at in the conclave, Gupta said, included digital payments, corporate governance in public sector banks (PSBs), credit for India’s micro, small and medium enterprises (MSMEs), and enabling India to become a $5-trillion economy. Meanwhile, a statement from the bank said it collectively identified many implementable and innovative suggestions which can help to improve the bank’s performance and establish a future roadmap.
“These suggestions were collated and have been sent to the regional/zonal level for further discussions at the state level bankers’ committee, along with comparative performance assessment of the branches under each region," it said.