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RBI rate cut makes auto cos happy

June 02, 2015 16:34 IST

CarsAuto industry, led by market leader Maruti Suzuki and Hyundai, on Tuesday welcomed Reserve Bank of India's move to cut key interest rate by 0.25 percentage points stating it will help improve consumer sentiment.

Automobile companies said the actual benefit for consumers will, however, depend on whether the banks pass on the benefits of the rate cut.

"For the auto industry the impact of the rate cut will be more in improving customer sentiments. It is definitely a step in the right direction," Maruti Suzuki executive director (marketing and sales) RS Kalsi told PTI.

Expressing similar views, Hyundai Motor India Ltd senior vice-president Sales and Marketing Rakesh Srivastava said: "It is a welcome move.

“This is a step towards lowering the cost of credit. This will help both customers and channel partners and will help in bringing more volumes."

Commenting on how the consumers will gain from the rate cut, Kalsi said: "We will have to wait if the banks pass on the benefits to customers. Banks will have to pass it on first."

He added, however, that the impact on equated monthly instalments will be minimal, as the current rate cut would "translate to a benefit of about Rs 11 per month per lakh".

Industry body Society of Indian Automobile Manufacturers director general Vishnu Mathur said now the onus is on the banks to pass the benefit to customers.

"This is the third rate cut this year, which has totlaled to a reduction of 75 basis points.

“In the past the banks have been very reluctant to pass on the rate cuts to customers. So, we can only hope that they would pass on this time," Mathur said.

RBI on Tuesday reduced the repo rate from 7.5 per cent to 7.25, but left all other policy tools like cash reserve requirement unchanged at 4 per cent and statutory liquidity ratio at 21.5 per cent.

 

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