Automobile majors including Maruti Suzuki India (MSI) and Toyota Kirloskar Motor (TKM) have reportedly approached banks and lending institutions seeking better terms of financing for their partners and vendors.
The idea is to help these associates also benefit from the three-month loan moratorium and softer interest rates, particularly for inventory financing.
Inventory financing typically involves short-term loans taken to purchase products for sale.
The Reserve Bank of India (RBI) recently cut repo rate by 75 basis points and permitted banks to offer a three-month moratorium on all term loans as part of the COVID-19 rescue package. However, the central bank is yet to clarify if short term loans such as inventory finance are also covered under the moratorium norms.
As per the Economic Times, MSI has started discussions with 13 financial institutions to extend the moratorium period for its 329 dealer partners across the country. Among the banks include ICICI Bank, State Bank of India (SBI), Axis Bank, HDFC Bank and Kotak Mahindra Bank, the report said.
Retail sale has halted but the ‘clock is running on inventory financing’, which is burdening dealers, Shashank Srivastava, Executive Director (marketing and sales) at Maruti Suzuki told the paper.
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Naveen Soni, Senior Vice-President at TKM said the company has approached SBI, HDFC Bank, Kotak Mahindra Bank, and ICICI Bank to seek a reduction in interest rates on inventory financing for its dealers.
Soni reasoned that the moratorium would only postpone payment. “TKM would pay a proportion of the reduced interest rates directly to finance companies to help its dealer partners,” he stated.
Toyota will also put in place measures to ensure dealers have 38-75 days working capital, Soni added.
However, these proposals will have to be first approved by the board of the individual banks.
Accrued interest along with the loan amount can be deferred or banks may also choose to extend the loan tenure.
Board-level policies are being looked at by banks for the same, the report said.Follow our full coronavirus coverage here