CV Loan Stress Rises Amid Slowdown, Lenders Hope for Recovery

India's commercial vehicle (CV) financing sector is under pressure. Several lenders, including Kotak Mahindra Bank, AU Small Finance Bank, and HDB Financial Services, flagged early stress in CV loans due to slow freight movement, weak rural demand, and weather disruptions. But many remain hopeful of a recovery later this year.

Kotak Mahindra Bank saw higher credit costs in April-June, led by delinquencies in its retail CV loans and microfinance book. The bank's CV and construction equipment (CE) loan book rose 13% year-on-year to ₹42,972 crore, but stayed flat quarter-on-quarter.

"The stress is not necessarily because there is overleveraging. I think it is genuinely to do with movement of goods, payments and particularly the goods segment," said Shanti Ekambaram, Deputy MD. She noted the impact was sharpest on operators with fewer than 10 vehicles.

AU Small Finance Bank highlighted stress in the used small CV (SCV) segment. Its ₹38,000 crore wheels book formed 32% of total loans. "The pressure in the used SCV segment started last year due to delayed capex and heavy rains," said Chief Credit Officer Vivek Tripathi.

HDB Financial Services saw early-stage delinquencies rise in its CV loan portfolio, which forms 38% of its ₹1.09 lakh crore book. CEO G. Ramesh pointed to a sharp increase in vehicle prices as a driver of stress. Yet, he expected things to stabilize.

Mahindra Finance reported a 12% year-on-year and 36% quarterly drop in CV and CE disbursements to ₹2,354 crore. CEO Raul Rebello noted "interim correction in certain geographies," but stressed this wasn’t a pullback. The used CV segment, he said, remains strong for NBFCs.

“There are early signs of stress in commercial vehicle financing... However, it still seems a manageable number and shouldn't be a big problem,” said Jinay Gala of India Ratings and Research.

In contrast, Shriram Finance stayed positive. It said trucking activity remained firm, with stable credit costs. "There’s no distress in the used CV market. Asset values are holding firm, and repossessions have not picked up significantly," said Umesh Revankar, Executive Vice Chairman. CV loans made up 45.23% of Shriram’s ₹1.23 lakh crore book in Q1.

While freight rates in India remain flat and small transporters feel the strain, lenders expect an uptick by late August with festive demand and infrastructure projects. For now, CV loan recovery rides on macro revival and steady rural demand.

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