ICICI Bank pips Citibank in automobile loan race

Citi's share has dropped from 27% in the 90's to 8% now

Citibank, the pioneer in the domestic auto loan market, has lost its Number One slot to ICICI Bank. ICICI Bank had already overtaken Citibank in terms of credit cards issued.

Citi's share in the auto loan market has dropped from 27 per cent in the late '90s, when it was the leader, to less than 8 per cent now. In 2003-04, ICICI Bank had a 29.2 per cent share of the auto loans market, according to data sourced from Crisil Research and Information Services.

Its share has increased from less than 10 per cent in the late 1990s. Similar is the growth story of HDFC Bank whose share has more than doubled to 11 per cent.
 

In top gear
	2001-02	2002-03	2003-04
ICICI Bank	16.70%	22.20%	29.20%
Standard Chartered	7.70%	8.30%	8.90%
Citigroup	9.70%	8.30%	8.10%
HDFC Bank	5.60%	7.80%	11.00%
Source: CRIS INFAC

Citibank country business manager - global consumer group, Sarvesh Sarup, told Business Standard: "Citibank's market share has fallen from 27 per cent few years ago to a single digit now. We are still in the market only to ensure the space is not vacated for the competition."

On why Citibank was still offering auto loans, Sarup said: "We are in the business for the benefit of car dealers and customers." He admitted that Citibank was making losses in the business.

Banking sources said margins have fallen to ridiculously low levels and this has not only prevented new players from entering the market, but also caused decimation of strong competition. ICICI Bank has successfully knocked out competition through predatory pricing.

The total outstanding auto loan book at the end of March 2004 was Rs 34,100 crore and is expected to have risen to Rs 43,780 crore at the end of March 2005. The total disbursements in 2003-04 were Rs 22,700 crore and are estimated to have risen to Rs 26,700 crore in 2004-05.

The new auto finance market has increased at a compounded annual growth rate of 25.7 per cent from 1998-99 to 2003-04.

Hongkong and Shanghai Banking Corporation (HSBC) ended arrangements for car loans at automobile showrooms over a year ago and Standard Chartered Bank followed it late last year.

An HSBC official said car buyers normally prefer to complete loan documentation at the car dealership itself, not wanting to take the pains of going elsewhere in search of the right loan package. HSBC still offers new car loans at its branch offices, but there are hardly any takers for this.

IDBI Bank is keen on entering the car loan market, but "negligible" margins have delayed its foray. An IDBI Bank official said "If we lend Rs 1,000 crore in new car finance market and Rs 250 crore in two-wheeler financing, the amount of interest income that we will earn will be the same."

In 2003-04, ICICI Bank disbursed Rs 7,200 crore of auto loans, HDFC Bank Rs 2,700 crore, Standard Chartered Bank Rs 2,200 crore and Citibank Rs 2,000 crore.