Union Bank of India has signed an MoU with Mahindra and Mahindra to finance the auto-maker’s commercial vehicles across India. Speaking to BTVi , Union Bank of India Executive Director Vinod Kathuria says the company has already tied up with TVS Motors, Atul Auto, Bajaj Auto, Ashok Leyland, Tata Motors and Piaggio for similar financing schemes.

Union Bank is also planning to tie up with Maruti Suzuki, SML Isuzu, Eicher Motors, Force Motors and Volvo.

The lender hopes to finance 10,000 vehicles every month and lend ₹300-400 crore through the Pradhan Mantri Mudra scheme, he said.

Can you take us through the MoU you have signed with Mahindra and Mahindra? What does it entail to the bank’s profitability and what kind of opportunity do you see in it?

We have signed an MoU with Mahindra and Mahindra, as well as six other companies — TVS Motor, Atul Auto, Bajaj Auto, Ashok Leyland, Tata Motors and Piaggio. Moreover, some more MoUs are in the pipeline — with Maruti Suzuki, SML Isuzu, Eicher Motors, Force Motors and Volvo.

Around 10-12 companies in India manufacture light and heavy commercial vehicles.

Our model is very simple. Under the Pradhan Mantri Mudra Yojana, we can finance up to ₹10 lakh just on the basis of KYC and CIBIL scores of a borrower.

Basically, we are helping owner-driven vehicles.

The rate of interest is very attractive at 10.85 per cent, and the margin is just 15 per cent. And we need the KYC and CIBIL scores of the party and nothing else.

There is no processing fee, no file charges.

We have further made it simple — only a one-page application and a processing note.

We have signed MoUs with seven companies. We have around 4,200-plus branches, 10 field General Managers and 62 regional offices. We have prepared a structure wherein one DGM-level officer is posted in a central office looking after entire India.

On the field, there are 10 GMs and one GDM-rank nodal officer. Every branch is authorised to finance light and heavy commercial vehicles.

Since April, we have financed 9,287 vehicles, and the amount financed is more than ₹200 crore. And we are targeting to finance 10,000 vehicles every month and it can give a growth of ₹300-400 crore every month when we reach the target.

What kind of revenues do you expect through this commercial vehicle financing deal?

Will there be a change in the lending rates going forward?

If we keep the lending rate at 10.85 per cent, it is attractive for the customers as well as for us. If the rate of interests goes down, whatever our cost of funds and cost of deposits are, we will have a good margin. Moreover, we are helping people under Pradhan Mantri Mudra Yojana. We honour drivers. They will become the owners.

There is mushrooming of growth in the light commercial vehicles market.

Now, whatever consumer durables come to the cities, they are offloaded on the outskirts of the city. Then they are shifted to small shops and departmental stores in the city.

All these shifting of goods is being done through light commercial vehicles. We need to make the scheme attractive for the owner-drivers as well.

Related Topics