Dealer Finance
- Credit metrics used to rate dealers not only include financial parameters but non financial ones like dependency, vintage, past performance of targets, and Industry related factors as well as subjective “market feedback” from dealers.
- Alternative products like PTCs can broaden investor participation.
Dealer finance lending is estimated at around INR 90,000 crores. Contrary to popular notion, dealer programmes are relatively better performing and well below the GNPA rates for regular lending in the same institution. Anchor commitment to the dealer funding is a powerful deterrent to default. Market players have hence specialised in some industries to improve returns and penetration. Our approach to dealer funding is based on portfolio approach, granularity and past track record.
Dealers
- Collateral free working capital solution.
- Accessing wider network of investors can reduce pricing.
Anchors
- Balance sheet management by early realisation of receivables.
- Off balance sheet funding helps reduce bank debt.
- Risk management of lower rated debtors.
Lenders
- End use is known – to pay the Anchor.
- Past history is available and hence limits are based on experience.
- Portfolio effect – the loans are spread over many borrowers. First loss guarantees can improve this further.