In recent months, the pattern of vehicle financing in India has shifted towards more borrowers taking multiple loans and borrowing larger sums. 7% a year earlier. This trend is mirrored in the average loan amount, which has risen steadily across all vehicle categories. The rise in multi‑loan borrowers is most pronounced in the commercial vehicle segment, where a higher proportion of owners are financing trucks and buses with several overlapping loans.
The average loan size has also edged up, reflecting a move towards premium models and extended credit terms. Such concentration of debt can amplify default risk if economic conditions deteriorate or if fuel price volatility spikes. For lenders, the growing exposure to multi‑loan borrowers translates into a higher probability of non‑performing assets. Banks and non‑banking finance companies may need to tighten credit underwriting or raise interest rates to compensate for the increased risk.
A surge in NPAs could also affect the broader banking sector, potentially pushing the Nifty Bank index higher as risk‑adjusted earnings decline. Retail investors holding shares in auto‑finance firms like Bajaj Finance, Mahindra & Mahindra, or HDFC Bank’s auto loan arm should monitor loan‑to‑value ratios and NPA trends. While higher loan volumes can boost revenue, the accompanying risk may erode profitability and dividend prospects. Diversifying into sectors with lower debt concentration could mitigate exposure to this emerging credit risk.