Repo rate hike to increase car and two-wheeler EMIs, pause growth, says FADA

Auto loans are set become more expensive soon. The Reserve Bank of India (RBI) announced on Wednesday that the repo rate has been hiked by 40 basis points which means the banks will offer loans to customers at an increased rate. This will result in a spike in EMIs for those looking for a new car or a two-wheeler. Federation of Automobile Dealers Associations (FADA), which represents over 15,000 automobile dealers having 26,500 dealerships across the country, did not welcome the move saying it may scuttle the growth engine in the auto industry.

FADA says the increase in repo rate will apply certain amount of brake on the auto industry's growth. (File photo) (MINT_PRINT)
FADA says the increase in repo rate will apply certain amount of brake on the auto industry's growth. (File photo)

Reacting to RBI's decision to hike lending rates, FADA said the increase in repo rate will "apply certain amount of brakes" on the industry's growth, especially the two-wheeler segment which has suffered more amid recent slowdown in the industry.

"The RBI’s move of increasing repo rate by 40 bps has clearly taken everyone off guard. This move will curb excess liquidity in the system and will make auto loans expensive," Vinkesh Gulati, President of FADA, said in a statement.

Also check these Vehicles

Find more Cars
Emflux Motors Emflux Two (HT Auto photo)
₹ 4 - 4.50 Lakhs* *Expected Price
View Details
Bmw R 1250 R (HT Auto photo)
1254 cc
₹ 15.95 - 16.25 Lakhs* *Ex-showroom price
Add to compare
Check latest offers
Atumobile Atum Version 1.0 (HT Auto photo)
₹49,999***Ex-showroom price
Add to compare
Check latest offers
Svitch Bike Svitch Bike Svitch Xe+ (HT Auto photo)
₹98,999***Ex-showroom price
Add to compare
Check latest offers
Ultraviolette F77 (HT Auto photo)
₹ 3.80 - 5.50 Lakhs* *Ex-showroom price
Add to compare
Check latest offers
Emflux Motors Emflux One (HT Auto photo)
₹ 5.50 Lakhs *Expected Price
View Details

Also Read : Auto loans in India may become costlier. Here is why

According to FADA, the two-wheeler segment will not be able sustain the hike in vehicle loan costs. The segment has already seen decline in sales in the rural markets amid price hikes and high fuel costs. However, FADA thinks the passenger vehicle segment may be able to absorb the hike in lending rate due to long waiting periods. "Certainly, this move will apply certain amount of brakes on auto retail and dampen the sentiments further," Gulati added.

In March, two-wheeler sales declined by 4 per cent to 11,57,681 units as compared with 12,06,191 units in the year-ago period, FADA stated. Last month, 10,99,167 units of two-wheelers were sold across India, up by more than 15 percent over 9,53,338 units sold in April last year.

The repo rate is the rate at which RBI lends money to banks. It has gone up to 4.40 per cent from a record low of 4 per cent. This is the first time that the rates have been revised since August 2018. The RBI also hiked the cash reserve ratio (CRR) by 50 basis points to 4.5 per cent, which will now require banks to park more money with the central bank and leave them with less to offer as loans to customers.

First Published Date: 05 May 2022, 10:26 AM IST
Shopping Bag Shop Now
70% OFF
VENO Portable High Power 2 in 1 Car Vacuum Cleaner | USB Rechargeable Wireless Handheld Car Vacuum Cleaner Traveling, Camping Reusable and Sustainable (2 in 1 Vacuum Cleaner)
Rs. 899 Rs. 2,999
1% OFF
Godrej aer O – Hanging Car Air Freshener | Car Accessories | Cool Aqua (7.5g)
Rs. 98 Rs. 99
65% OFF
Ambrane 38W Fast Car Charger with Dual Output, Quick Charge 3.0 and Power Delivery, Type-C & USB Port, Wide Compatibility for Smart Phones (RAAP C38 A, Black)
Rs. 349 Rs. 999
68% OFF
PUNZONE Car Body Scratch Remover - Scratch Repair Polishing Wax Kit Sponge Body Compound Cream Wax, Car Body Compound Scratch Remover
Rs. 289 Rs. 898

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.