The segment that Northern Arc focuses on caters to the credit needs of driver turned owners, first time users, first time buyers and small road transporters.
Typical end clients come from low income households who have limited access to formal sources of financing and whose livelihood is directly dependent on the vehicle. A large number of NBFCs have developed the ability to underwrite borrowers such as self-employed customers like small traders, suppliers, shop keepers with good credit profiles, and salaried employees usually taking up their first job in the organized sector.
The size of the Indian vehicle finance market is around USD 20 billion. Private sector banks, NBFIs, and captive financiers of the Original Equipment Manufacturers (OEMs) dominate this market. NBFIs account for approximately 50 percent of the total vehicles financed. While banks mostly target large fleet operators, NBFIs have a greater market share among the small operator’s market.
Used vehicle financing contributes to over 27 percent of vehicle finance portfolio of NBFCs and expected to grow at around 15 percent. This niche segment holds great promise in terms of growth potential. The overall NPA numbers are low hence resulting in an attractive risk-adjusted return in this sector.
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