Banks cautious on funding automobile players due to slowdown in sales, says Nikunj Sanghi of ASDC

Lenders are being cautious on funding automobile players, said Nikunj Sanghi, chairman of Automotive Skill Development Council, after HDFC Bank stopped its funding for some Eicher Motors sellers.

"No banks want overexposure in terms of inventory," he said in an interview with CNBC-TV18.

Sanghi said the stress is more in 2-wheeler and CV space where the inventory levels are higher than expected.

“It’s not so bad in passenger vehicle segment where manufacturers did do some amount of inventory correction. Therefore, we hope that both 2-wheelers and commercial vehicles would also bring down inventories and this could be the best time because this quarter is a slow quarter," he said.

According to him, the current auto slowdown is more severe than in previous years.

However, Ashish Harsharaj Kale, president, Federation of Automobile Dealers Association said a lender stopping the funding was a routine exercise.

“As we have been mentioning that with tight liquidity situation and high inventory level, dealer working capital is definitely coming at a premium, but I wouldn’t say there is panic to be talked of. This is an ongoing assessment which a banker does with his customers and I can tell you that 90-95 percent of the dealers have a healthy relationship with bankers and financers,” he said.

“High inventory is the biggest worry that bankers and financers today have as far as auto dealership operations and their funding goes especially in 2-wheeler and commercial vehicle space,” he said, adding “but the comment that dealer inventory funding has stopped is incorrect."