As per the sanction by the Reserve Bank of India (RBI), banks are not allowed to pass a loan below the set base rate. But a recent update from the sources brings out a different story altogether. Reports have surfaced that banks have now begun to offer loans below RBI's mandatory base rate to luxury car buyers asking for a loan amount of Rs. 40 lakh or above. Though none of the bank officials have confirmed the news, there are rumours doing the rounds that customers of luxury cars get loans in the range of 9 to 9.15 per cent from banks. Also, car loans at 7.5 to 8 per cent are being offered by non-bank lenders when the prescribed base rate is 10 per cent. The rate for walk-in customers is over 11 per cents as opposed to that of 7.5 to 8 per cent. A senior official from an auto financing firm denied the fact, stating that if the car is taken as a consumer product, such high loans cannot be passed in the form of consumer product loans. Besides, one can not borrow at 10.25 per cent and then lend at 9.15 per cent.
The Non-Banking Financial Companies (NBFC), financing institutions that provide banking aid without meeting the legalities of a bank, do not need to follow the base rate rule set by the RBI. For instance, BMW offers its customers the facility of getting their cars financed by BMW Financial Services India. They provide loan schemes with an interest lower than the base rate so as to trigger their market. As per officials from the company, they have tried their best to develop a leading financing company for the nation and also facilitate their customers with special offers so as to counter tough market conditions. Even though the company levies around 11.25 per cent on its latest 1 Series but the older model is offered at a much lower rate. The interest rates depend largely on the model and the year of launch of the car. A major portion of this firm's sales are done through its financing organisation. "In an effort to stimulate the market, we have chosen the path for our company financial services to develop the best financing product in India and we offer attractive offers to customers to tide over this not-so-easy market environment," said Philipp Von Sahr, the President of BMW Group India.
NBFCs can provide rates lower than base rate because they do not possess a banking license. Since they are not required to follow the RBI's mandate, they can easily offer lower rates. As per experts, there's a lot of negotiation associated with such firms and they allow loans on luxury cars at as low as 9 per cent. This is the case with quite a number of financing units but there are some that do not offer loans lower than the rack rate. The captive financing unit of Mercedes-Benz India, Daimler Financial Services does not offer any financial scheme below the rack rate. This firm charges 12.5 per cent for a car loan of a three year duration and has no plans to lower the rates considering the fact that the scenario of today's times is challenging and unpredictable. On contacting the officials of this firm, it was told that they try to avoid passing on short-term funding cost to their customers as of now but they might think about bringing changes in their current schemes. The rates levied also depend on the payment structure and down payment. Car loan is among the most common kind of loan in India and almost every citizen of this country depend on it when going for car purchase.
