The global financial crisis has been sending its shockwaves to India as well. Its efects were clearly visible at the Paris Auto Show last week and the Indian auto industry is also bearing the repercussions. Despite the cut of 50 basis points in the CRR by the Reserve Bank of India, major car financers have either hiked their interest rates or are planning to follow with similar measures.
The decrease in CRR should have led to more money with the banks which would help the banks to open up on the lending front. However, the amount released is marginal and banks do not reflect any easing up signs in the short term. “Interest rates are the net impact of several factors like deposit base and operating costs and since the situation continues to be tough, the 100 bps hike was inevitable,” stated N Ravinarayanan, auto finance head, ICICI Bank.
On the other hand, car sales have dropped in the Indian market as well. Auto makers witnessed a marginal increase in sales in the month of September. However, sales figures in July and August had been portraying a gloomy picture. With the beginning of the festive season, car dealers and auto makers in India are hoping to clear their inventory which had piled up in past three months.
