Mortgage costs can be high in India.This is the reason

RBI has increased the repo rate by 40 bps. This means that banks will increase the rate of lending to car customers.

To: HT Autodesk
May 4, 2022 7:34 pm

A file photo used for expressive purposes. (Reuters)

Are you planning to buy a new car or have you almost sealed the decision to ride that shiny bike? OEMs are raising model prices due to factors such as rising input costs, but the Reserve Bank of India (RBI) has raised major interest, which could hurt affordable prices for those considering installment routes. Pause before shifting gear due to its nature At a rate of 40 bps, it’s the most surprising decision.

News that raises repo rates can affect a variety of sectors, but the automotive sector is particularly concerned. OEMs that are already suffering from a wide range of challenges can see potential disruption in demand for OEMs across the segment when supply and production are sluggish. Vinkesh Gulati, Chairman of the Reserve Bank of India (FADA), said: The PV segment has a long wait period and may be able to absorb this shock, but the 2W segment was unprofitable due to sluggish local markets, soaring vehicle prices and soaring fuel costs, but the other cannot be borne. The blow of high mortgage costs. “

Gratty predicts a “brake of the car retail industry” and a slower sentiment, but Wednesday’s stock market reflects similar sentiment that car, real estate and bank stocks are falling. Among automakers, Ashok Leyland is 4.44%, Bajaj Auto is 3.54%, TVS Motors (3.31%), Marti (3.17%), Hero MotoCorp (3.08%), M & M (2.70%), Tata. The Motors (2.70%) plummeted. 2.11%), according to the news agency PTI.

What is a repo rate?

Repo rate is the rate at which RBI lends to a commercial bank. An increase here means an increase in the interest rates of the general public imposed on EMI. The repo rate has now been raised from 4% to 4.40%, the first northward move since August 2018.

What is the reserve requirement ratio?

The reserve requirement ratio (CRR) is the amount that a bank must deposit with a central bank. The higher the CRR, the fewer banks the bank needs to lend to the general public. On Wednesday, the CRR also rose 50 basis points to 4.5%.

What does the rise in repo rate and CRR mean for the automotive sector?

Demand in India’s automotive sector has been quite sluggish. Passenger cars are still doing pretty well, but supply chain problems caused by a global shortage of semiconductor chips are negatively impacting production and leading to long wait periods. In the case of motorcycles, the demand itself is sluggish. The commercial vehicle segment has not been impressed either.

Demand for cars across segments could be hit as there are signs of soaring mortgages.

First release date: May 4, 2022 7:34 pm IST Mortgage costs can be high in India.This is the reason

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