If you’re planning to buy a car or a motorcycle through an auto loan, chances are that you’ll have to pay a higher interest rate even as the Reserve Bank of India, in a bid to contain rising inflation has raised the repo rate by half a percent or 50 basis points.Due to this, the Indian banking sector finds itself in a position of having to raise interest rates for auto loans by a quarter to half a percent. The decision regarding the interest rate hike is expected to arrive in the next few days.
Meanwhile, here’s a statement from IDBI Bank’s Executive Director R K Bansal,"I think banks do not have any other option but to increase rates. It could be 25 basis points or 50 basis points, depending on individual banks". With that your plans of buying a car or a motorcycle will mean that you need to set aside a larger amount each month for your EMI. Also, higher rates could slow down car and motorcycle sales, which have already shown signs of a slowdown in April, 2011.
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