Repo effect: Car loans to be dearer
The repo rate hike by RBI is likely to hit car sales as banks are considering to increase interest rates on retail financing. Cars of the future | Cars that'll make you drool
By TNN |
NEW DELHI: The repo rate hike announced by RBI on Wednesday is likely to hit car sales as banks are considering to increase interest rates on retail financing further.
Leading bankers said interest rates on auto financing could go up by 25-50 basis points, following RBI���s move to increase its lending rates by 25 basis points.
Sumit Bali, CEO of Kotak Mahindra Prime Ltd, the vehicle financing arm of Kotak Mahindra Bank, said interest rates could go up by 50 basis points. ���Though we are yet to announce the hike, the increase would be around 50 basis points,��� Bali said.
Leading bankers said interest rates on auto financing could go up by 25-50 basis points, following RBI���s move to increase its lending rates by 25 basis points.
Sumit Bali, CEO of Kotak Mahindra Prime Ltd, the vehicle financing arm of Kotak Mahindra Bank, said interest rates could go up by 50 basis points. ���Though we are yet to announce the hike, the increase would be around 50 basis points,��� Bali said.
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Bali said the higher lending rates could bring down growth in car sales to 8-10 % this fiscal against the 12% in 2007-08.
Ashok Khanna, executive V-P at HDFC Bank, said it was increasingly becoming difficult for banks to lend at present rates as liquidity dried up and borrowing became expensive. The bank will be taking a call on revising lending rate on Saturday, which is expected to go up by 25 basis points.
Currently, the average interest rate charged by banks on car loans hovers around 12-12 .75% while in case of two-wheelers it���s as high as 22-23 %. Interest rates have been moving up over the last two years.
ICICI bank group head Ravi Narayanan did not specify whether the bank was going to increase interest rates.
However, he pointed out that just as higher lending rates and other negative factors like inflation and bearish markets are dampening demand, salaries and disposable incomes are also rising. ���I feel that car sales will still manage to grow by 10-11 %,��� Narayanan said.
What would be the effect of a 50 basis point hike on a car loan of Rs 4 lakh taken for three years. According to estimates provided by bankers, the net increase on the monthly EMI would be only about Rs 100, which does not appear high when looked in isolation.
���However, it cannot be looked at in isolation. Interest rates have been continuously going up for the last one-and-a-half years and the cumulative increase certainly makes a very big impact,��� said Jnaneswar Sen, V-P at Honda Siel Cars India.
Ajay Seth, chief general maneger at Maruti Suzuki, also said the repo rate hike would impact demand. ���This is not good news for the car industry though the negative impact will not be significant,��� he said. Seth, however, said rising income levels would mean sales would continue to grow.
Courtesy:timesofindia.com
However, he pointed out that just as higher lending rates and other negative factors like inflation and bearish markets are dampening demand, salaries and disposable incomes are also rising. ���I feel that car sales will still manage to grow by 10-11 %,��� Narayanan said.
What would be the effect of a 50 basis point hike on a car loan of Rs 4 lakh taken for three years. According to estimates provided by bankers, the net increase on the monthly EMI would be only about Rs 100, which does not appear high when looked in isolation.
���However, it cannot be looked at in isolation. Interest rates have been continuously going up for the last one-and-a-half years and the cumulative increase certainly makes a very big impact,��� said Jnaneswar Sen, V-P at Honda Siel Cars India.
Ajay Seth, chief general maneger at Maruti Suzuki, also said the repo rate hike would impact demand. ���This is not good news for the car industry though the negative impact will not be significant,��� he said. Seth, however, said rising income levels would mean sales would continue to grow.
Courtesy:timesofindia.com
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