HDFC couples GPS tracking into Auto Loans. Car loan customers of HDFC Bank Ltd were forced to purchase a vehicle tracking device for about four years ended 2019 in a possible breach of guidelines.
HDFC Bank executives pushed auto loan customers to buy GPS devices costing ₹18,000-19,500 from 2015 to December 2019, according to two people aware.
“These devices were bundled along with the loan, where reluctant applicants were told that unless they agreed to take this product, their loan would not be sanctioned,” the first of the two people said, adding senior executives at the auto loan unit were under extreme pressure to meet sales targets for these devices.
The device was sold by Track point GPS, a Mumbai-based firm. Data from the registrar of companies shows the company’s revenue jumped 175 times between FY 15 and FY 19. It posted a loss of ₹3.87 crore in FY 19 on the back of ₹78.31 crore revenues, with expenses overshooting revenues.
HDFC Bank Uses GPS To Track
A former employee of Track point told Mint on condition of anonymity. That the company’s sales executives were told to meet HDFC Bank officials frequently. And arrive at sales targets for these devices. “It was like a tie-up where the bank provided loan customers to us. And we provided the devices”. Said the person cited above.
The Banking Regulation Act, 1949 specifies certain businesses that a bank may engage in, apart from its role as a lender. These have been defined under 15 broad sub-categories and states that “no banking company shall engage in any form of business other than those referred to in sub-section (1)”.
“We have had a formal tie-up with HDFC Bank to offer this crucial service to their auto loan customers. But only as an opt-in model. At no point were we engaging with customers who did not need or want our service”. Said Amar Amin, founder and chief executive, Matchpoint GPS.
HDFC Bank’s auto loan book stood at ₹81,082 crore. As on 30 June, down 3.39% sequentially, and constituted 17% of its retail loans. The bank is investigating its former head of department, Ashok Khanna in the alleged scam.
Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services LLP said. As the lender has part-ownership interest in the vehicle. It is within rights to track the location of the vehicle.
“If the borrower is told upfront that this product is a prerequisite for the loan, there is nothing wrong. But prima facie, it appears this product was being pushed by a few officials. Of the bank without complete knowledge of top management”. He said.
Some experts believe that such devices enhance lenders security in times of default. It can act as a measure against rising NPAs.
