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Strain on Commercial Vehicles
Why in the news ?
- According to Fitch Ratings, rising fuel prices could strain India’s commercial vehicle operators and lead to a rise in auto loan delinquencies,.
More on news
- Fitch said that the operators may find it easier to pass increased costs on to customers than during previous fuel price spikes.
- Diesel prices in Delhi averaged Rs.67.4 per litre in June, which was 26% higher than a year earlier and rising more than 50% compared with January 2016.
- Increase in fuel price causing stress for commercial vehicle operators , since freight rates have so far not kept pace with rising fuel prices. As for operators, fuel accounts for a significant proportion of overall costs.
- Upward pressure has stemmed from the recovery in global oil prices and depreciation in the Indian rupee, which has fallen by almost 7% against the U.S. dollar since the start of the year.
- Commercial vehicle loans make up almost all of the pools in our Indian auto asset backedsecurity (ABS) portfolios.
- Most borrowers in these pools are small operators that depend directly on their vehicles for income, and some could find it difficult to make repayments if their margins continue to be squeezed.
Source
The Hindu