Auto Finance vs. Banks

Today I read an article mentioning that the banks are going to “approach the Competition Commission of India citing alleged unfair trade practices by car makers” Now, a backdrop of who they want to fight against, is necessary.

The auto makers operating in India like BMW, Audi, Toyota etc. have begun something called “Non Banking Finance Companies (NBFC’s)” to provide customized finance to their customers. Looking at the concept as a whole, it makes sense right? It wouldn’t have taken the automakers long time to figure out their customer’s ire about the banking loan procedures and flexibility, which in turn play a hand in shrinking the auto market, while people may postpone their decision to purchase cars as a luxury symbol they cannot yet afford. The companies extending to help their customers by offering flexible repayment options and minimum hassle free paperwork through NBFCs (set up through their own corporate affiliate companies) just extends the bond between a company and its end consumer.

The article mentions that the Indian car loan market is valued at Rs. 40,000 crore! And instead of banks rolling up their sleeves and getting competitive to fight for their share in the market, it is indeed shocking to read that the banks are approaching a regulatory authority to “regulate” the competition. Why cite “unfair practices”? If the banks wanted to fight for a share in this market, then they should have done so by playing the game.

A sad picture painted by the banks in India, portraying a child running to his Daddy to win a game of pure ability! Will the Daddy play a patron of free market or a bully, is yet to be seen.

Note: The article referred to here is from the Economic Times (25^th Oct 2012 issue), titled “Auto Finance: Banks to Approach CCI)