Public sector banks (PSU) are ahead of private banks in car financing business. According to the marketing head of car companies, all the public sector banks are regaining lost grounds on car finance because of their quick respond to RBI's move to reduce interest rate and boost cash flow in the market.
Presently, State Bank of India (SBI) is leading the trend and following the SBI are other PSU banks including the Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank and the Syndicate Bank.
Commenting on the same, Executive Officer (marketing and sales) of Maruti Suzuki, Mayank Pareek said, “PSU banks have become aggressive. Against the perception that they are slow in processing applications, the PSU banks have vastly improved quality of their services which today are no less than private sector banks.”
It is believed that the share of PSU banks in financed car sales of Maruti is about 70% and the rest 30% is shared by the private banks. Sr. Vice President (marketing and sales) of Hyundai, Arvind Saxena also agreed to what Pareek said and commented, “PSU banks have been very active in the market and off late their share in our financed car sales has surpassed that of private sector banks.”
Ankush Arora, Vice President (sales and marketing) of General Motors India, also reported that the share of PSU banks in GM's financed car sales has gone up to 45% with SBI capturing 15% of the overall share.
The key reason of the success of PSU banks is the wide reach of the banks as well as the lower rate of interest they offer. At present these banks are offering car loan at an interest rate that hover between 12.5-13.5%. It is also believed that higher percentage of sales is coming from smaller regions where public sector banks enjoy higher penetration. In addition, the reluctance of private sector banks to offer low car loan interest has given a boost to the car financing business of PSU banks.