For Quick Alerts
For Daily Alerts

Working Capital For Auto Companies May Get Costlier


Auto companies amid slowdown in the sector might see another blow as the leading lender has proposed a higher collateral. In its recommendation, SBI proposes collateral of 25% over and above the inventory on issuance or increase of loans. In an earlier scenario, collateral would be the stock a dealer would buy from an automobile company against a letter extended to the bank by the manufacturing company.

Working Capital For Auto Companies May Get Costlier

This proposal is made to burden dealers to reduce their inventory holding. Since Diwali last year, the sector is reeling in extreme distress with low sales that has forced dealers to cut down on their staff as well as shut showrooms. Also, there is seen no immediate relief as sales during the last month also remained weak.

Nonetheless, in view of the current stress, SIAM deputy director in a report says that the time is just not right to put additional burden on auto players. "Inventory finance was already impacted when GST was introduced, and now with collateral, the cash-strapped dealerships will find it difficult to come out of the downturn", he added.

Story first published: Thursday, August 1, 2019, 9:43 [IST]
Company Search
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more