HDFC Bank, Kotak Mahindra to hike auto loan interest rates

Private sector lender HDFC Bank is likely to raise interest rates on auto loans by 0.50 per cent in the next 7-10 days, a senior bank official said today.

"Borrowing rates have gone up -- we are likely to raise our rates (auto loans) by 0.50 per cent in the next 7-10 days," HDFC Bank Senior Executive Vice-President Ashok Khanna told PTI here today.

Another private sector lender, Kotak Mahindra Bank, is also feeling the pressure to raise its auto lending rates, one of its senior officials said.

"There is pressure to raise our interest rates on vehicle loans, but we have not yet taken a decision on it," Kotak Mahindra Bank's Head of Consumer Banking, K V S Manian, said.

With deposit rates going up, there is a possibility of a 0.50 per cent hike in auto loan interest rates, he said, emphasising, however, that the bank has not yet taken a decision on the matter.

At present, the interest rate on Kotak Mahindra Bank's auto loans ranges from 9.5 per cent to 10.25 per cent, Manian said.

HDFC Bank's Khanna said the market is in a position to "comfortably absorb" the hike in lending rates. "By the year- end, there is even a possibility of rates going up by 1 per cent," he added.

The average interest rate on the bank's auto loans is in the range of 9.5 per cent (for the D-premium category) to 11 per cent (A-category), he said.

"There is a huge supply shortage and as new models come into the market, demand (for cars) will escalate," Khanna said.

The lender disburses around Rs 2,000 crore every month on vehicle loans, out of which Rs 1,400 crore is for cars, he said.