Vehicle loan books of non-banking financial companies are poised to jump to Rs 8.1 lakh crore by March 2025 from Rs 5.9 lakh crore in March 2023, according to a report.
The growth will be driven by rising demand of commercial vehicles, cars, utility vehicles, and two-/three-wheelers, accompanied by government focus on infra spending, Crisil Ratings said in a note.
Higher loan sales amid better repayments will lead to improved asset quality, the report added.
Commercial vehicles accounted for 50% of vehicle loans as of March 2023, followed by cars/utility vehicles at 29%, two-/three-wheelers at 11% and tractors at 10%, the report said.
'Commercial vehicle finance is seen growing 12-14% per annum over 2023-25, propelled by growth in end-user industries such as cement, steel, and consumer durables,' Ajit Velonie, a senior director with Crisil Ratings, said.
The loan growth is also being fuelled by used-vehicle financing amid a rise in prices of new vehicles.
Besides, credit profiles of vehicle financiers have also been supported by steady improvement in asset quality since the last fiscal.
An analysis of vehicle financiers, which collectively account for over 90% of sectoral loans, shows that overall 90+ Days Past Due (DPD) improved 120 basis points to 4.7% in the last fiscal.
Given the strong correlation of asset quality with overall economic activity, the overall 90+ DPD should improve 50 bps to 4.2% this fiscal and sustain at a similar level in the next fiscal, Malvika Bhotika, a director with the agency, said.
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