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The repo rate hike is likely to add to the burden of the automobile industry, which is already reeling under sluggish demand.
Buyers may rethink on purchases during the festival season, as interest rates on loans will go up.
“This is another negative development for the market, though it will all depend on how banks react to it — whether they increase the interest rate or not. Earlier, when the repo rate came down, they (banks) did not change anything,” Jnaneswar Sen, Senior Vice-President – Sales and Marketing, Honda Cars India, told Business Line .
But, if the banks react to the RBI announcement this time and increase interest rates, it will be bad for the auto industry, he said.
The impact of high interest regime is evident from the continuous decline of sales in the last several months, said the Society for Indian Automobile Manufacturers.
“The industry had been hoping for a recovery through the ensuing festival season. But, this move comes as a surprise dampener to all these expectations. The repo rate will also downgrade the sentiments of consumers struggling under the burden of high equated monthly instalments,” Sugato Sen, Deputy Director-General, SIAM, said.
The increase in the repo rate would add to the challenges, Rakesh Srivastava, Senior Vice-President - Sales and Marketing, Hyundai Motor India, said.
“We were expecting marginal growth in sales during the festival season due to a good monsoon but now even that looks challenging,” P. Balendran, Vice-President, General Motors India, said.
However, according to analysts the impact would not be sudden and the increase in the repo rate is not very significant.
“Banks will not increase the interest rates suddenly because they are cautious and already worried over the non-performing assets,” Abdul Majeed, National Automotive leader at PricewaterhouseCoopers India, said.
> ronendrasingh.s@thehindu.co.in
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