The Hindu Business Line : NBFCs lower auto loan rates in race with public sector banks

New Delhi, July 3 Faced with stiff competition from public sector banks, Non-Banking Finance Companies (NBFCs) have been forced to lower their rates on vehicle finance. In the past month or so, NBFCs have brought down interest rates by 100-200 basis points or one-two percentage points, say industry officials.

The vehicle financing arms of Tata Motors and Bajaj are also providing interest subvention schemes or cash-back up to a certain amount of the disbursed loan if the customer does not default on monthly instalments. Industry officials say the gap between them and private financiers is now down 100-150 basis points from the 200-300 basis points.

Increasing competition

“Car financing is difficult as competition from public sector banks is increasing. Our rates are now between 12 and 14 per cent,” said Mr Ravi Todi, Joint Managing Director at Magma Fincorp.

“We have reduced interest rates between 100 and 200 basis points from May-end to June. Earlier our rates were 14-15 per cent. Now they are 12.50-13 per cent. Our own ability to raise money has been quite good,” said Mr Ramesh Iyer, Managing Director, Mahindra Finance.

Interest rates of the vehicle financing arms of Tata Motors have also dropped up to 300 basis points in the last two-three months, according to officials at dealerships.

A spokesperson for Tata Motors Finance did not reveal the reduction in the interest rates despite repeated queries from Business Line. But dealership sources say that the prevailing rates are now 12.50 per cent from the earlier 15-16 per cent.

“We are running a scheme under which we give back customer 2 per cent of the disbursed loan amount back if there is no default on a single equated monthly instalment in the past three years. On four years, the cash-back is 2.5 per cent and five years 3 per cent,” said an official with Tata Motors Finance at one of the dealerships.

According to Mr Milind Bade, General Manager (Marketing) at Bajaj Auto, its financing arm has for a week now been offering an interest subvention of 6 per cent on its motorcycle XCD. In April, it launched a scheme of 10 per cent rate on models such as Pulsar 150 and 180 cc for almost two months.

“We come out with select schemes on certain products. It helps to pre-pone sales and a competitive rate acts as an enabler,” he said.

More Stories on : NBFCs | Consumer Finance | Cars | Interest Rates

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