Finance companies have applied for priority sector lender status for money they receive from banks to provide loans for the purchase of two-wheelers (TWs). This would help them get cheaper funds from banks and increase lending, especially in rural areas, according to the Financial Industry Development Council (FIDC).
The industry lobby group said in a plea to the Reserve Bank of India that two-wheelers play a crucial role in the rural economy as they help improve living standards and enable convenient and safer travel at an affordable price. They also help to increase income.
“In view of the value and use, we ask the respected authority to consider financial assistance for the purchase of two-wheelers in the rural economy as a priority sector loan, as this will allow lenders to provide funds in a timely manner at a cheaper cost,” the FIDC said.
The priority sector refers to the sectors that the government and the RBI deem important for the development of the basic needs of the country and which should be prioritized over other sectors. Banks have a mandate to encourage the growth of these sectors with adequate and timely credit, he said.
The use of two-wheelers in the rural economy is not limited to self-driving but also to the transport and delivery of milk, vegetables and other common goods.
The penetration of two-wheelers is lower in India than in other developing countries. For every 1,000 people, only 102 people own a two-wheeler in India, compared to 166 in Malaysia, 281 in Indonesia and 291 in Thailand.
India’s rural market has a strong consumer base of about 740 million people, of which about 30 percent only own two-wheelers in the rural segment, the FIDC added.
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