Impact of RBI policy decision on the Auto sector Hi folks
Sharing the news with the wider forum and putting together my thoughts on the same.
The RBI on Tue Jan29th cut its key policy rates - Repo rate and Cash Reserve Ratio (CRR) - by 25 basis points each. In simple terms, Repo rate is the interest rate at which RBI lends ovenight funds to banks to help them tide over temporary liquidity deficit and CRR is the quantum of deposits that banks have to park with RBI.
What this means is banks are having now slightly excess funds (approx Rs. 20,000 crore ) with them and they can afford to offload or cut the min lending rate for retail, micro, SME and large enterprises, albeit by not much margin.
For us mortals, these cuts are a step in the right direction as far as retail loans are concerned.
In today's scenario, banks offer anything from 10% to 14% for a new car purchase with PSU banks leading the charge and private banks following them.
On the issue of rate cuts, the doyens of auto industry seem to have divided opinion. Quoting a few leaders below:-
SIAM - This is definitely a positive development and it is likely to send a positive signal in the market although the cut is very less.
Maruti Suzuki - The cut is too less for now and may not bring in any big impact.
M&M - This announcement is welcome and will help revive investments in the core sectors.
GM - Don't think a reduction of 25 basis points will immediately support revival of demand.
So in summary, we now have to see how does the sector (Manufacturers + Banks) play out to help trigger the auto sector and in turn effectively bring down the total cost of ownership of a car for the retail consumer.
Regards
JoshMachine |