Cars to cost more from now

Car buyers are in for a double blow. While car manufacturers are mulling an increase in prices by 2-3 per cent in early May due to continuous rise in input costs, banks have already hiked interest rate on auto loans by 50-75 basis points.

The move, that comes after RBI increased the Cash Reserve Ratio (CRR) by 50 per cent to be implemented in two phases, will translate into an average increase of Rs. 150 per month in the EMI on a loan of Rs. 1 lakh, for both new as well as used cars.

Banks like ICICI, Kotak Mahindra and Reliance Capital have increased interest rates from 13.5 per cent-13.75 pre cent earlier to 14.25 per cent-14.5 per cent. The hike will hit the largest selling compact cars the most and will mean that one has to shell out on an average Rs. 16,200 more on a loan of Rs. 3 lakh for a period of three years.

As reported by Financial Express, Rajan Pental, Auto Finance Head, HDFC Bank said, "The Reserve Bank of India has announced a significant hike in CRR last week and this has forced banks to increase the interest rates across all retail segments including auto loans. The bank will announce the hike in the first week of May."

The current hike is second in series this year. The first interest hike was announced by banks in January when the effective rate to the customer was hovering around 12.5 per cent - 13 per cent.