Auto Sector Hit Hard by Interest Rates

In New Delhi they are finding that the increase in rates that the RBI has announced is having a major effect on two industries, car loans and home mortgages. People are finding it harder and harder to finance either thing with the way the rates have been increasing. It used to be that low rates were everywhere and people could not wait to get a new car loan, or even a used car loan, as it was much more affordable.

However, that is no longer the case, and the auto and housing industries are starting to feel the pinch from it. Experts say that if the interest rates continue to climb, they are going to start seeing vehicle pricing drop to try and entice people to take out car loans. As it stands right now, many people are either choosing not to purchase a car at all, or they pay cash. Either way, they are not taking out car loans they way they used to.

Hero Honda CFO Ravi Sud was quoted as saying that the interest rate increases have already had an effect on the sales of two wheelers. He says that March sales will be flat when compared to other years, as the hardening interest rates are making the monthly installment payment higher.

Bankers say that they have seen a decrease in the number of personal loans as well, which many feel will affect the car industry negatively as well, as many people take out personal loans to finance cars. They say that the economy in India will continue to grow, but only by 8% - which is much lower than the normal 9.2% that they see.

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