Consumers can soon get cheaper car loans from banks. Bankers expect these rates to dip by at least 25 basis points (bps).
“The car industry has seen a slowdown post Diwali. With the slowing demand for cars, we do see a dip in the interest rates by at least 25 basis points,” said Vyomesh Kapasi, CEO, Kotak Mahindra Prime.
Kotak Mahindra Prime, a part of Kotak Mahindra Bank, is primarily engaged in providing finance and loan services for all type of passenger vehicles, new or used. Kotak Mahindra Bank has already cut car loan rates by 25-50 basis points to 11.5-12.25 per cent in October 2012.
SIAM forecast
With the Society of Indian Automobile Manufacturers (SIAM) forecasting passenger car sales growth at less than 1 per cent — the slowest in nine years — banks are expected to reduce interest rates to stimulate buying.
In December, passenger car sales had declined by 12.5 per cent, the steepest drop since August last year when sales fell by 18.56 per cent, according to SIAM data.
SBI, the largest public sector bank, has reported over 30 per cent growth in this portfolio, aided significantly by the fact that it offers one of the cheapest loans in the market. Its market share in the auto loans segment was 20 per cent as of October 2012.
Private sector player HDFC Bank’s auto sector loan growth was lower at 16 per cent from 18 per cent in the September quarter. The lender recently reduced its base rate (minimum lending rate) by 10 basis points, which made car and other loans cheaper. The bank is likely to reduce auto loan rates by further 50 basis points, according to market estimates.
To up market share
“We have seen a shift in the way people are spending. More people are opting for small cars. Hence, there are no major concerns in the loan growth. Big players like SBI, HDFC Bank, Kotak and IndusInd are increasing their market share,” said Vishal Narnolia, Research Analyst, SMC Global Securities Ltd.
“Overall, the passenger vehicle has shown a growth of 7 per cent during this fiscal as compared to the last fiscal. We expect interest rates to soften by 50-100 basis points,” said T. A. Rajagopalan, Senior Vice-President, Consumer Finance Division, IndusInd Bank. The consumer vehicles segment for IndusInd Bank has grown about two per cent in the last 12 months.