Indian auto sector welcomes RBI rate cut: Hopeful for vehicle sales to grow in festive season

The slashing of repo rate will push consumption during the ongoing festive season. This will help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.

By: | Updated: October 4, 2019 6:19 PM

Indian auto industry body Society of Indian Automobile Manufacturers (SIAM) on Friday welcomed the RBI's lending rate cut saying that cheaper finance solutions with the festive season nearly approaching will help improve vehicle demand. The central bank has slashed its benchmark lending rate by 0.25 percentage points to 5.15 percent. This is the fifth straight cut in rates by the Reserve Bank in as many policy reviews in 2019 and takes the total quantum of reductions to 1.35 percent.

The slashing of repo rate will push consumption during the ongoing festive season. This will help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.

“The reduction of repo rate by 25 bps is a welcome move indeed by RBI. We hope that the banks would fully pass on the repo rate cut benefit to the consumers in the form of lower lending rates. The onset of the festive season, along with the availability of cheaper finance should induce higher demand for vehicles,” Rajan Wadhera, President, SIAM, said.

The automotive sector has been going through a prolonged slowdown with sales plummeting to an all-time low in almost two decades in August. Read more here: 32 percent drop in passenger vehicle sales in August worst ever: SIAM

Welcoming the rate cut by RBI, Toyota Kirloskar said that it could translate into lower EMIs for existing borrowers and less expensive loans for new borrowers, provided the benefits are passed onto the end customers. This, along with several other measures announced by the government over the last two months, is expected to revive the market and buyer sentiments and spur domestic demand. We believe this measure will also add to the festive cheer in the market.

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