Auto Loan Rate Hike

It seems that ICICI Bank, the largest lender of auto loans in New Delhi has decided to raise their rates. This does not bode well for the rest of the auto loan industry, for if they are raising their rates, the others are sure to follow.

The auto loan company has raised their interest rates on two and four wheelers between fifty and seventy-five points. The rates will be retroactive back to April 15th for their auto loans. Experts say that ICICI usually sets the standard and if they are raising their rates, than others will start raising theirs as well.

It is expected that HDFC Bank will follow next – but they are working on what they are going to do considering the Cash Reserve Ratio that the Reserve Bank of India just announced. Citibank has already chosen not to compete in the auto loan industry any longer due to the financial climate.

The banks say that with the high number of defaults on auto loans and increased operating expenses, it is becoming difficult to offer car loans. They admit that even though rates on auto loans usually change once every six months, they have changed their rates three or four times this year. This makes a big difference for lenders as well.

They say that if the market continues the way it has it will be almost impossible to offer auto loans – especially those without collateral. At some point they will simply stop offering unsecured auto loans.



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