In spite of the fall in car prices triggered by the government's decision to reduce Cenvat, auto loan off-take has failed to pick up.

Bankers and car financiers say the demand for car loans had not risen so far this month, even though many banks are offering loans that are 50 to 100 basis points lower than their benchmark prime lending rate (BPLR).

While public-sector banks are offering car loans at 12-13 per cent interest, private financiers are charging 15-16 per cent a year.

"The scenario is as bleak as in November. Credit demand for automobiles has not increased. In case of commercial vehicles, the demand has gone down by at least 50 per cent. In case of personal vehicles, it is 25 per cent lower," said Magma Fincorp vice-president and managing director Sanjay Chamria.

A Union Bank of India [Get Quote] executive said the demand for loans in December has actually come down. December is usually a month where sales go up as companies push year-end demand through freebies and special offers before raising prices in January.

Auto loans have failed to pick up despite car manufacturers passing on the benefit of 4 per cent lower Cenvat and offering hefty discount to push sales.

"The present cost structure does not allow us to cut rates further, as the cost of funds is still at 12-13 per cent. It is not possible to offer further freebies and lower interest rates," said Chamria.

UCO Bank [Get Quote] is offering car loans at 13 per cent per annum, which is 0.75 per cent less than the BPLR, and has also introduced a special offer where the loans are priced at 12.25 per cent.

"Auto loans did not see any substantial pick-up in the last few days. We hope the demand will increase in January," said United Bank of India Chairman and Managing Director S C Gupta. The bank is offering loans with a tenure of up to three years at 12.25 per cent, though the BPLR is 13.50 per cent.

Dealers such as Imperial Honda's Chairman Jyoti Bagaria said that only the newly-launched models are selling through the company cut prices by Rs 19,000-31,000 across models.

A company spokesperson said that buyers are postponing purchase decisions anticipating incentives and rate cuts. Besides, she said that banks have not reduced rates by a significant amount.

While public sector banks are offering loans, many private sector lenders such as ICICI Bank [Get Quote] and Citibank have scaled back their operations in the wake of rising delinquency levels.

These banks are waiting for the economic environment to improve before they return to the market in a big way, banks executives have said.