ICICI Bank hikes auto loan rates

ICICI Bank, the largest lender of vehicle finance has raised interest rates on two-wheelers and four-wheelers between 50 and 75 basis points with effect from April 15.

HDFC Bank is likely to follow which is currently working out its strategy, post Cash Reserve Ratio (CRR) hike recently announced by the Reserve Bank of India.

As reported by Business Line, Mr Rajan Pental, Senior Vice-President, Auto Loans, HDFC Bank said, "We would not be comfortable to work with dealers or customers if we are not provided with collateral perfection -the documents supporting the registration of the vehicle. Ideally, it is the role of the dealers, but in many cases where customers do the registration on their own, banks are not provided with the documents making it difficult to repossess the vehicle. This is particularly true in non-metro cities."

Banks cite high defaults, increased operating expenses due to longer transaction cycle and lack of collateral documents as the main reasons for the steady increase in lending rates.

On an average, banks increase interest rates on a six-monthly basis. But in the last financial year, the interest rates have been revised on three or four occasions. For instance, ICICI Bank's rates that were around 13.75-14.25 per cent till last month have now gone up to 14.5-15 per cent.