Auto Financiers Push India to Embed Credit Into Car Sales, Not Just Sell Loans

Auto financiers in India are pushing for a shift toward embedded finance and closer partnerships with dealers, rather than continuing to sell generic EMI products, as global markets move toward integrated digital credit at the point of sale. The push came at the Federation of Automobile Dealers Association’s (FADA) 5th Finance and Insurance Summit 2026 in Mumbai.

Rajan Pental, executive director at Yes Bank, said the industry has long treated auto loans as a simple instalment product but has not succeeded in developing a truly embedded one. ‘While the industry has been providing auto loans as an instalment product, we have not yet succeeded in developing an embedded product,’ he said, noting that customers now arrive at dealerships with full knowledge of the car and its features, only for the process to be delayed by a multiplicity of lenders.

In developed markets, Pental pointed out, lenders and OEM captives routinely offer fully digital, embedded credit at the dealer or through online configurators, complete with instant decisions, e-sign and funding tied directly to the vehicle order. Embedded finance in Europe and the US, he said, is maturing into platform-led models where banks integrate directly into OEM, dealer and marketplace journeys instead of selling standalone loans.

India’s auto finance market, by contrast, remains dominated by traditional loans, with leasing accounting for around 1.5% of the market and subscription models just 0.1%. Pental urged the industry to move beyond ex-showroom pricing and design financing schemes for every pin code, adding that banks — already heavy users of technology — could integrate systems to offer products to pre-approved borrowers.

C S Vigneshwar, president of FADA, called finance the ‘life blood’ of the auto industry, describing finance and insurance as the ‘load bearing walls’ keeping dealerships viable. Raul Rebello, MD and CEO of Mahindra Finance, said the industry has achieved scale and the rural-urban sales gap is disappearing, adding that co-lending offers room for further innovation now that multiple financiers operate at most dealerships.