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      Car loan set to get costlier as RBI hikes borrowing rates

      Vikas Yogi

      Vikas Yogi

      Car loan, the backbone of Indian auto industry, is set to get costlier as the central bank has increased the borrowing rates by 25 basis points (.25%). Though this is considered a moderate hike by RBI (Reserve Bank of India), but considering the overall hike of 350 basis points (3.5 percent) in last two years, it has raised concern among the market watchers.

      The borrowing rate hike from the central bank came at a time when the industry is already struggling to keep the high demand momentum alive. The auto loan providers pass this hike directly on the borrowers, making the demand for car loans to further dip. There has been a steep dip in sales in last two months after a golden drive of over two years.

      In last 18 months, there have been 12 successive hikes in the RBI borrowing rates. A hike just ahead of the festive season, when car maker were expecting to revive their sales numbers, will certainly wham the momentum in the Indian auto market.

      At present, over 70 percent car purchasing in the Indian auto market is being done through finance. Thus, hike in the borrowing rates affect the consumer sentiments badly.