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MOTORINDIA
l
February 2012
Better days ahead for auto
loan borrowers
Interest rates, which touched a peak in
2011, are expected to moderate in the next
few months giving some relief to home and
auto corporate loan borrowers in the new
year. Base or minimum lending rates of all
the banks in 2011 ranged over 10 per cent.
Even the deposit rates were the highest,
with the peak fixed rate hovering around 10
per cent in some cases.
However, in the mid-quarterly monetary policy re-
view RBI kept all policy rates unchanged and indicated
that rates might come down in the future. “While infla-
tion remains on its projected trajectory, downside risks
to growth have clearly increased... Further rates hike
may not be warranted,” the review said.
This statement has brought hope among the existing
as well as prospective borrowers at lower interest rates
in the coming days.
“I expect interest rate to start bottoming out from
March 2012,” PwC Associate Director (Financial Serv-
ices) Robin Roy said.
Rising interest rates, how-
ever, resulted in dete-
rioration of the
asset quality of the banks.
The Systemic Risk Survey conducted by RBI for the
first time has identified deterioration of the asset quality
as the highest risk.
The year-on-year growth rate of NPAs, at 30.5 per
cent, as at end September 2011 was higher than the
credit growth at 19.2 per cent. Slippages, that is, fresh
accretion to NPAs, too, have outpaced credit growth and
grew at 92.8 per cent (year-on-year) as at end Septem-
ber.
Despite the recent spurt in NPAs, the impairment lev-
els in Indian banks compare favourably with the bank-
ing sectors in both the advanced and peer economies.
The major sectors that contributed to the increasing
trend in NPAs were the priority sector, retail, real estate
vehicle finance
“I cannot really speculate on when we
might start cutting rates, but that is an
event, an action that is on the way for-
ward.”
– Mr. D Subbarao, RBI Governor