NBFCs seek priority sector tag for 2-wheeler loans financed by bank credit

Finance companies have sought priority sector lending status for the money they get from banks to give loans for buying two wheelers (TW). This would help them get cheaper funds from banks and increase lending, especially in rural areas, according to the Finance Industry Development Council (FIDC).

The industry lobby group said in a plea to the Reserve Bank of India that two-wheelers play a crucial role in the rural economy as they help improve the standard of living, and bring about convenient and safer movement at affordable price. They also help increase earnings.

“Considering the value and usage, we request the respected authority to consider the financial assistance to purchase two-wheeers in the rural economy as priority sector lending, as this will enable lenders to provide timely funds at cheaper cost,” FIDC said.

Priority sector refers to those sectors that the Government and RBI deem as important for the development of the basic needs of the country and are to be given precedence over other sectors. Banks are mandated to encourage the growth of such sectors with adequate and timely credit, it said.

The use of two-wheelers in the rural economy is not limited to self-riding but also for carrying and delivering milk, vegetables and other merchandise of day-to-day use.

The penetration of two-wheelers is lower in India than in other developing countries. For 1,000 people, only 102 people have two-wheelers in India, compared to 166 in Malaysia, 281 in Indonesia and 291 in Thailand.

The Indian rural market has a strong consumer base of about 740 million people, of which around 30 per cent only possess two-wheelers in the rural segment, FIDC added.