HDFC Bank may have bundled GPS devices with vehicle loans

HDFC Bank executives pushed auto loan customers to buy GPS devices costing ₹18,000-19,500 from 2015 to December 2019, according to the two people cited above, who spoke on condition of anonymity. The cost of the device was added to the loan amount.

“These devices were bundled along with the loan, where reluctant applicants were told that unless they agreed to take this product, their loan would not be sanctioned," the first of the two people said, adding senior executives at the auto loan unit were under extreme pressure to meet sales targets for these devices.

The device in question was sold by Trackpoint GPS, a Mumbai-based firm. Data from the registrar of companies (RoC) shows the company’s revenue jumped 175 times between FY15 and FY19. It posted a loss of ₹3.87 crore in FY19 on the back of ₹78.31 crore revenues, with expenses overshooting revenues. Trackpoint’s total expenses stood at ₹80.25 crore in FY19, including components such as commission and brokerage of ₹3.49 crore, and legal and professional fees of ₹2.84 crore.

Directors of Trackpoint include Amar V. Amin, Carey Bryan Fan and Vinod Ranchhodbhai Amin. California-based Matchpoint GPS Inc. is an investor in the company.

A former employee of Trackpoint told Mint on condition of anonymity that the company’s sales executives were told to meet HDFC Bank officials frequently, and arrive at sales targets for these devices. “It was like a tie-up where the bank provided loan customers to us and we provided the devices," said the person cited above.

The Banking Regulation Act, 1949 specifies certain businesses that a bank may engage in, apart from its role as a lender. These have been defined under 15 broad sub-categories and the Act clearly states that “no banking company shall engage in any form of business other than those referred to in sub-section (1)".

“We have had a formal tie-up with HDFC Bank to offer this crucial service to their auto loan customers but only as an opt-in model. At no point were we engaging with customers who did not need or want our service," said Amar Amin, founder and chief executive, Matchpoint GPS.

Emails sent to HDFC Bank remained unanswered.

HDFC Bank’s auto loan book stood at ₹81,082 crore as on 30 June, down 3.39% sequentially, and constituted 17% of its retail loans.

Ashok Khanna, the former group head of secured vehicle loans, was denied an extension after receiving two post-retirement extensions, Bloomberg reported on 13 July. Khanna left the bank in March.

Some believe lenders could be entitled to promote such a device as an enhanced security measure to cope with potential defaults on loans where the vehicle is the underlying security.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services LLP, said as the lender has part-ownership interest in the vehicle, it is within rights to track the location of the vehicle.

“If the borrower is told upfront that this product is a prerequisite for the loan, there is nothing wrong. But prima facie, it appears this product was being pushed by a few officials of the bank without complete knowledge of top management," he said.

However, a bank being able to track a vehicle under loan raises the question of privacy even if it is to ensure oversight of an asset.