There is a rising trend of defaulters on vehicle loans by drivers of cab aggregators such as Ola and Uber. As a result, banks like State Bank of India (SBI) have stopped disbursing fresh vehicle loans to drivers and are pushing to recover dues. At a time when cab aggregators are struggling to keep costs in check and keep drivers on board, this comes as a major jolt.
According to a report by The Economic Times, nearly a fifth of SBI’s loan book in Bengaluru is defaulting because of which the bank has stopped vehicle loans to drivers plying cars for Ola in the city.
Speaking to ET, Gopal Krishan Kansai, chief general manager, small and medium enterprise of SBI in Mumbai said, “The total default amounts to Rs 60 crore in the city. We still disburse loans to Ola vehicles in Hyderabad and Chennai where the default rate is almost 7 percent,” he added.
ET reports that apart from the SBI, industry analysts estimate that some of the other key lenders for driver loans include ICICI Bank, Mahindra Finance and Tata Motors Finance.
It is known that driver incomes of Ola and Uber have fallen in the past few months, especially after both cab aggregators cut down on incentives to drivers. There were reports of several drivers abandoning cars they leased from Uber as they were unable to afford them anymore. Defaulting in loans also, banks say, started after incentives were reduced and incomes fell.
Analysts say that the hit has been felt the hardest in Chennai, Bengaluru and Hyderabad, which have the highest number of drivers registered on these platforms.
Additionally, bankers who spoke to ET say that defaults are higher among Ola drivers as they accept more cash payments when compared to Uber’s drivers. This is an issue because typically ride-hailing apps deduct loan instalments before settling payments. While this process works smoothly for digital transactions, it becomes a problem when drivers receive payments from customers in cash.
According to SBI, 1,300 commercial car loans were disbursed for Uber across India excluding Bengaluru and Delhi-NCR, disbursing around Rs 35 crore. And these accounts reported less than 1% of the defaults.
There have also been cases where defaulting drivers have been untraceable while in some cases, drivers kept plying the cars without paying their dues to the bank.
Ola and Uber have been incessantly burning cash in a bid to retain market leadership. They even showered incentives for drivers to bring them onboard and retain them. However, when losses soared, driver incentives were cut. There have been several reports of drivers unable to fend for themselves as incomes fell and loan instalments had to be paid.
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