SBI: State Bank of India suspends car loans for Uber and Ola

MUMBAI|NEW DELHI: The State Bank of India has suspended car loans for Uber and Ola taxis across most of the country amid a rise in defaults by their drivers . The bank has seized close to 300 cars for payment defaults, which reflect lower earnings by drivers amid a surge in cab numbers and a decline in incentives paid out by the aggregators.

SBI, which has total exposure of Rs 120 crore toward cabs, had seen considerable stress in these accounts, people aware of the matter said.

“We have stopped financing vehicles under Ola and Uber (select geographies) as have we decided to take a cautious approach,” said a top SBI executive. “Suspension is temporary because we want to watch the situation for some time. There have been certain changes in regulations in many geographies and it’s prudent to see how it evolves before financing these vehicles again.”

There was no response to queries from Ola and Uber.

While suspension was implemented in larger markets like Mumbai, Delhi and Bengaluru, sources said a few disbursals continued in markets like West Bengal, Odisha and Hyderabad. SBI had stopped such loans in Bengaluru last year.

SBI has extended loans of Rs 60 crore for owner-drivers operating under Ola with defaults at around Rs 16 crore. Its vehicle financing portfolio for Uber stood at Rs 70 crore with a lower delinquency rate of 2%.

“Our total portfolio towards taxi aggregator vehicle financing has come down from Rs 130 crore to Rs 120 crore,” the SBI executive said. “We saw delinquencies of Rs 15-16 crore in that portfolio.” The bank is stepping up recovery from these accounts, through auctioning the seized vehicles,” the official said. “We have auctioned about 80. Currently, we are seeing a 20% recovery in NPA accounts.”

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Axis Bank suspended vehicle financing for Uber car loans last year. “We review performance of various segments in our auto loans portfolio on a regular basis and exit some segments on the basis of their conduct,” an Axis Bank spokesperson said in an emailed statement.

Uber and Ola drivers told ET they know friends and relatives whose cars have been seized by banks for non-payment of monthly installments. Drivers said competition in the sector and new payment structureshad lowered earnings.