The Hindu : Tamil Nadu / Chennai News : More turn to private financiers

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Monday, Mar 23, 2009
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Tamil Nadu

Tamil Nadu - Chennai

More turn to private financiers

K. Lakshmi

Many banks have stopped financing vehicle purchase and personal needs

Photo: S.Thanthoni

REDIRECTED: The stringent credit norms of various banks have turned the customers’ attention towards private financing companies. —

CHENNAI: With several banks tightening their credit norms, there has been a steady increase in customers approaching private financiers and finance companies to obtain loans for vehicle or property purchase and personal needs.

S.Vinod of Royapuram is one of customers who are either postponing their purchase or waiting for finance due to banks’ hesitation to provide vehicle loans. “The nationalised bank that I approached said it could sanction only 60 to 70 per cent of the total value of the car. So, I had to opt for private finance despite the relatively higher interest rate by 2 to 3 per cent,” he said.

Financiers in the city said the demand for private financing had increased particularly after many banks stopped financing for vehicle purchase and personal needs. However, their approach to credit disbursal has become more vigilant.

P. Rakesh, a private financier, said that with banks turning down applicants, even smaller companies and individual financiers are receiving more customers. He lends money to regular customers and those with sufficient collateral to ensure that they repay on time.

With increasing defaulters, customer profile-based lending has gained significance than asset-based loans. Sanjay Bhansali, joint managing director of Deccan Finance Limited, Nungambakkam, said “we take longer to process applications as even those with records of timely settlement of loans defer payment due to slump in the economy.”

Though private financiers demand applicants to put in a share of up to 25 per cent of vehicle’s total value as initial payment, such norms would be made flexible depending on the customers’ genuineness unlike the banks.

As there has been a drastic fall in the value of used vehicles, seizing automobiles of defaulters would only complicate the issue. Instead, most financiers extend the repayment period and encourage the customers to pay in smaller amounts, Mr.Bansali added. Vijaykumar Bafna who is involved in housing finance , said a small percentage of the private financiers have been affected by credit overdue. But it is not at alarming level. The new customers are given credit after thorough verification of their documents. “While the interest rate provided by banks varied between 8 and 13 per cent, the private finance interest rate is 15 to 18 per cent. Though there is a rise in demand, we are unable to provide loans to all customers due to lack of funds,” he said.

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