Car & bike loans will soon get costlier than ever. The government of India has revised the RBI repo rates which will make the interest rates go up soon.
If you are planning to buy a new car or a new motorcycle & are worried about the long waiting periods; well there is another bad news for you. The Reserve Bank Of India has revised its repo rates. The new revision is an increment of 40 bps in the repo rates. So, why is it bad news then? Well, the car & bike loans are now going to be costlier.
As if the constant struggle from the semiconductor shortage & pandemic hit the market were not less; RBI decided to make the auto sector go through one more atrocity. The increment of the repo rates means that the interest rates of the car & bike loans will increase gradually. This is news that the automotive manufacturers and the new buyers were waiting for.
But what is a repo rate? Well, the repo rate can be defined as the interest rate at which the RBI provides the sum to the private banks. This equates us to the fact that a rise in repo rate is a direct rise in the interest rates. In turn, these interest rates are paid by increasing the interest rates over the passenger vehicle loans, as they sell the most.
The pandemic hit automotive market and especially the Federation of Automobile Dealers Association (FADA) is not much encouraged by this decision. According to the official statement of FADA, the car loans shall not become an immediate problem to the customers due to long waiting periods. But, the bike loans are what worrying the manufacturers. In India, the two-wheeler segment is largest selling in the auto market. While the most sales comes from rural markets, the pandemic has slowed the sales to bare minimum. An additional blow of increased loan will definitely kill the minimal growth.
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The total increment of 4.4 percent in repo rate has taken aback the growing confidence among auto-manufacturers. After August 2018, this is the most northwards movement that the RBI interest rates have ever witnessed.
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