The Hindu Business Line : Who is going to finance the car

Chennai, March 22 Public sector banks are all set to take the lead in financing the Nano, with those in the private sector undecided still on whether they should offer loans to customers wanting to purchase the low-cost car or on what kind of package they should come up with.

Tata Motors has signed agreements with nearly a dozen public sector banks for financing its range of passenger vehicles, with terms considered attractive.

However, these tie-ups are not specific to the Nano.

According to banking industry sources, the tie-ups with the government-owned banks should help Tata Motors as these banks have the branch network, especially in the semi-urban and rural areas, which is where Tata Motors expects its newest offering to be a big hit.

State of loan industry

The sources say the reluctance of the private banks to finance a Nano buy is more a reflection of the auto financing industry — as the financiers are grappling with defaults in repayment of loans and their inability to take possession of vehicles — than on the Nano itself.

However, a top executive of a private bank, who did not want to be identified, said, “we cannot afford not to be there.”

Banking industry sources say there will be two distinct categories of Nano buyers:

One, those upgrading from a two-wheeler and, two, those who already have cars but are buying this one for the use of their children, to drop and pick them from school.

For the first set, the sources say, the fuel bill will go up from Rs 750 a month now to Rs 2,500, which will be the EMI (equated monthly instalment) amount for a loan.

How will they be able to afford the EMI and the fuel bill, the industry sources ask.

As for the second category, the sources say they will be able to easily write out a cheque for Rs 1.50 lakh, which will be the on-road price of the car and may not want a loan at all.

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Banks gearing up to design special loans for Nano

More Stories on : Cars | New Projects | Consumer Finance | Public Sector Banks | Tata Motors Ltd

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