Finance companies...

There are instances where these banks and finance companies have given personal loans to either the lessee or his spouse to cover up the balance. The Central Bank Governor, Dr. Indrajit Coomaraswamy last week said he wouldn’t hesitate to tighten the monetary policy further should the private sector credit lead to an unsustainable level, something the International Monetary Fund had also advocated.

Wanigasekara in his review in the FHASL 2017 annual report said the industry is observing a strong shift towards two-wheeler leases from four-wheeler and three-wheeler leases after the LTV restrictions came into effect. In fact, his claims are proven by the monthly vehicle registration numbers, which demonstrate around 5,000 to 6,000 incremental two-wheeler registrations being recorded. Out of the total motor vehicle registrations, over 90 percent comprises of two-wheelers and a recent survey has found that a majority of road accidents involve two and three-wheelers. “The market for finance leases on four-wheelers has contracted as a result of fiscal and regulatory action and has become competitive”, Wanigasekara added. In his review he argued that higher LTVS on fourwheelers lead to more secured lending but the argument appears holding no water.

The analysts argue that the opposite is true because lower LTVS ensure that a lease is more than adequately backed by an asset, hence the finance company could recover the loan by way of re-possessing the vehicle.

According to FHASL data, finance company assets have grown by a healthy 15 percent during the year ended in March 31, 2017, albeit a slowdown from a year earlier where the people were in a vehicle buying binge.