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MUMBAI: If you are thinking of buying a new car, you may as well bring forward your decision as interest rates on new car loans are likely to see a 25-50 basis points hike.

While interest rates on personal loans and credit cards may remain constant, interest rates on other retail products like loans against shares and such other products may see a marginal hike of 25 bps.

The rise in interest rates on retail products is on the back of the hike in repo rates by 25 bps as also a rise in risk weightage on consumer credit by 25-125%.

The Reserve Bank of India, in its mid-year review of its Credit Policy, said on Tuesday that as a temporary counter-cyclical measure, it has proposed to put in place risk containment measures which will involve increasing the risk weight from 50% to 75% for housing loans and from 100% to 125% for consumer credit, including personal loans and credit cards. It said that the growth in consumer credit has been very strong.

“The repo rate hike will have a more immediate impact. Depending on competition, the rates would go up by at least 25 bps. I expect the rate for auto loans and mortgages to go up. The RBI is looking at forcing more discipline.

The capital requirement would go up,� said Murali M Natrajan, GM and head of home loans, car loans and banking strategy, Stanchart.

Added Anail Jaggia, COO, Centurion Bank: “It is a fairly large increase and is a signal to increased lending to corporates. The interest rate in the retail sector would go up on the back of different dynamics.

It will dampen the growth of credit on the retail segment. The RBI may be looking at wanting the sector to grow in a measured way.�

Outstanding credit by way of personal loans rose by 26% to Rs 35,165 crore as on March 19, ’04 against Rs 27,905 crore in March 21, ’03. However, most banks have in the last two quarters seen a rise of over 25% in their retail portfolios.

The interest rates on the retail portfolio have seen a sharp fall over the last few years. On an annual basis, interest rates on car loans are at 8-9%, personal loans at 13-19% and loans against shares at 9-11%. Interest rates on credit cards are currently between 1.5% and 3% on a monthly basis.

The RBI has constituted a working group to look into the regulatory and customer protection aspects and suggest measures for card usage. It said that in recent years, plastic cards (credit, debit and smart cards) have gained greater acceptance and momentum as a medium of financial transactions.

The volume and value of transactions undertaken using these cards have increased significantly. The central bank said that while recognising the popularity of cards, regulatory and customer protection measures assume importance.

The number of credit cards in the country has seen a 30-40% rise on a yearly basis and is currently at 12m while debit cards have been growing at over 50% and is now at 22m.