Maruti Suzuki, which controls about half of India’s car market, said it has signed an agreement under which Bank of Baroda will provide loans to its dealers and customers.
Under the agreement, Maruti Suzuki dealers will be able to get loans from Bank of Baroda by giving their inventory or stock as collateral.
The move comes as many auto dealers across the country are facing heavy cash crunch due to the piling up of inventory. Inventory levels have risen due to a noticeable slowdown in offtake by customers, which is in turn the result of a slowing economy.
Dealers will find it difficult to manage their finances when their working capital gets tied up in unsold stock.
Maruti Suzuki also said the deal is likely to help its customers get vehicle loans from Bank of Baroda, India’s No.2 state-owned bank.
“The partnership with Bank of Baroda will allow Maruti Suzuki to provide more comprehensive financing opportunities for dealers as well as customers,” the company said.
It said the dealer inventory financing will be done as per bank of Baroda’s existing product program of supply chain finance.
“We are confident that this collaboration with one of India’s largest public sector bank will offer new-age banking and finance solutions for our customers and dealer partners,” said Shashank Srivastava, executive director for marketing and sales for Maruti Suzuki.
“This new collaboration will help us in ensuring the same. I’m confident all our customers and dealer partners will take benefit of this new alliance.”
PS Jayakumar, MD & CEO of Bank of Baroda said the agreement will help his bank strengthen its presence in the auto loan and commercial finance category.