Core Insights - The reduction in GST rates on select vehicles has revitalized retail sentiment, leading to increased demand for auto loans and passenger vehicle sales [1][3][6] Vehicle Loan Growth - In September, India's banking sector experienced a vehicle loan growth of 7.3% year-on-year, a decline from the 14% growth seen in the same month the previous year [2] - For the first half of the current financial year, vehicle loan growth ranged from 7.3% to 10.8%, compared to a rise of 13.9% to 17.2% in the same period last year [2] Impact of GST Reform - The GST reforms effective from September 22 created a two-slab tax system, significantly reducing rates on certain vehicle categories, which has led to a recovery in vehicle demand [3][8] - State Bank of India reported a nearly 10% year-on-year growth in auto loans to ₹1.28 trillion during the September quarter, attributing this to the GST cuts [8] Segment Performance - Commercial vehicle sales increased by over 8% year-on-year to 240,000 units, while passenger vehicle sales fell by 1.5% to 1.04 million units, although there were signs of recovery towards the end of the quarter [9] - The two-wheeler segment saw over 7% year-on-year growth, totaling 5.56 million units sold in the July-September period [12] Market Sentiment and Future Outlook - Bankers noted that the recent uptick in vehicle loans is still in early stages, with sustainability dependent on continued demand through the festive season [6] - IndusInd Bank reported a significant rebound in vehicle loan disbursements post-GST implementation, with expectations of continued demand momentum supported by the festive season and improved economic activity [17][16] Commercial Vehicle Segment Challenges - Despite some growth in commercial vehicle sales, lenders remain cautious due to borrower over-leverage and economic sluggishness, leading to tightened underwriting standards [21][23] - The effective cost for customers in the commercial vehicle segment has not changed significantly, as manufacturers have reduced discounts rather than passing on the full benefits of GST cuts [20][21]