RBI Rate Increase Turns Car Loans Pricey

Reserve Bank of IndiaWith RBI rates increase, car loan providers have raised interest rates by 75 to 100 basis points. The enhancement would mean a monthly increase of Rs 50 for a five-year loan having a daily rest basis.

ICICI Bank’s direct selling agents (DSAs) said they have accepted an official report from the bank on the cost increase effective from Monday. Rack rates are inclusive of DSA commissions.

The officials stated, “We used to lend at rack rates of 15% per annum, we are now been told that the new rates will be 16% effective from Monday.”

Sumit Bali, CEO of Kotak Mahindra Prime, alleged, “Our new rates will be decided on Wednesday. The broad indication is that the rates would go up by anything between 50 to 75 basis points. Our current rack rate is around 15.75%.”

“We believe that with increased interest rates on loans, demand for fresh purchases are bound to soften. Basically, the cost of ownership has gone up and how many can afford increased rates such as these,” Mr. Bali added.

The loaners have also silently augmented dealing out charges for car loans.

According to ICICI Bank’s DSA that previously we used to charge 1.5% as processing charge, but now ICICI Bank informed that the altered rate for the same would be 2%.

Kotak functionaries preserved that their working charges remain unchanged at 0.5%. Car buyers prefer to take up a personal loan in place of a car loan.

A SBI representative said a personal loan from SBI could be availed at 12.75%, whereas car loans for up to 3 years can be availed at 11.5% and arises to 12% for a seven-year loan.