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LAHORE: A major bank has tightened its auto loan policy while some of the banks are also revising their auto financing facility and are expected to tighten their auto financing policies in the coming weeks, sources in the banking industry told Daily Times on Monday.
They said that the banks are revising their auto loan facility because of certain reasons that include increases in bank defaults, non-performing loans (NPL) and growing rush at the roads because of the increasing number of vehicles. Another bank had revised its auto loan policy. Earlier, this bank was very aggressive in giving away loans for automobiles but has now changed its policy, sources said, adding that other banks are also working on the same lines and would tighten their policy.
The banks used to disburse loans using different techniques and have divided the clients in segments. Banks give credit to the clients while keeping in view some of points, which include customer’s credit relation with the bank and the account holder’s transactions.
In the past, those people who had no relation with the bank or had no bank account were also preferred for auto loans but now the banks are tightening the auto facility, said a banker at the consumer finance department of a local bank seeking anonymity.
He said that his bank has revised its auto loan policy and has decided only to give loans to those people, who have a strong bank statement and whose savings must be equal to the instalment of the vehicle.
“In the past, I used to collect a photo copy of credit card and without any bank statement, the auto loan was approved but now I have been instructed only to go for those customers who have a strong bank statement,” he said. He said that earlier, the bank used to check Electronic Credit Information Bureau (ECIB) report of the customer and after finding it satisfactory, the auto loan was issued to the client. “Now, we have been told that if the customer has sound savings and their bank statement in the previous six months is good only then will a loan be issued to them,” the banker said.
Another major consumer bank had already revised its auto financing policy and closed down its consumer financing operations while a foreign bank has already stopped auto financing.
“Banks have no proper recovery teams and therefore have to stop consumer banking in order to avoid bad debts,” said Atif Ali, recovery officer at a private bank. He said that only those banks are facing problems that do not check the antecedents of their customers. “It is very important that the bank should know about the credit history and burden of its customer otherwise the default ratio increases and consequently its NPLs go up,” he said.
When contacted, the State Bank of Pakistan’s spokesman Waseem-ud-Din said that the SBP has not instructed the banks to tighten their auto loan facility and banks are taking these steps on their own. “The banks may be taking these steps for getting rid of bad debts,” the spokesman said.
Some four years ago, a number of banks started aggressive consumer banking, giving away loans for vehicles, personal use and home appliances. At that time, the mark up on auto finance dropped to 8.5 percent per annum. However, later the mark up underwent a revision and is currently touching 17 percent and it is quite high for the customers and it could be a reason for the bank default, said another banker Sadeed Malik.
Courtesy by “ Nauman Tasleem Daily Times - Lahore “ |
