ABN Amro knocked out of car finance business

Yet another foreign bank has exited new car financing business. After HSBC and Standard Chartered, ABN Amro Bank is the latest casualty of cut-throat competition in the automobile loan market.

"Competition in retail, secured lending industry has brought the business close to non-viability, especially auto loans," said a source at ABN Amro. The fierce competition in the Rs 30,000 crore new car financing market has seen foreign banks' share dropping over the last few years.

According to CRIS INFAC, the research arm of rating agency Crisil, ABN Amro's market had dropped to 2.8 per cent in 2003-04 from 4 per cent in 2002-03 and from 5.6 per cent in 2001-02.

Citibank, the pioneer in the domestic auto loan market, has also been relegated to the number two position by ICICI Bank. Foreign banks are blaming the country's second largest bank, ICICI Bank.

ICICI Bank is accused of causing a steep squeeze in margins in the automobile loans market, making it unviable. ICICI Bank's market has steadily increased to nearly 40 per cent in 2004-05 from 16.7 per cent in 2001-02.

Romesh Sobti, executive vice-president and country representative, ABN Amro Bank NV (India), said, "We find lending for automobile purchase direct from our branches more efficient. We can pass on the savings on dealer margins to our customers."

Bankers said banks cannot sell auto loans sitting in branches as customer need to avail of the loan products available with automobile dealers in order to extract a good discount on the car they propose to buy.

Citibank country business manager - global consumer group, Sarvesh Sarup, had earlier said the bank was suffering losses in the car purchase financing business and were "still in the market only to ensure the space is not vacated for the competition."