Race to lower car loan rate hots up

A day after ICICI Bank cut rates, Axis Bank follows with a 50-75 basis points cut.

Car loans could soon go the home loans way with private lenders scrambling to match each others’ rates.

Just a day after India’s largest private sector lender, ICICI Bank, cut auto loan rates, Axis Bank followed with a 50-75 basis points (bps) cut.

The country’s third-largest private sector lender is offering car loans at 10-10.5 per cent depending on the category of the vehicle and tenure of the loan.

Yesterday, ICICI Bank had cut auto loan rates by 25-50 bps to 9.5-11.5 per cent.

“The cut is not in response to any player’s move. Based on customer research and interactions as well as the market feedback, we feel this is the appropriate time to offer lower rates for our customers,” said Manju Srivatsa, president, Retail Banking at Axis Bank.

A spokesperson for ICICI Bank said, “Our auto loan rates are in line with the competition and the payout (to dealers), at an average of 2 per cent, is in line with the competition.”

HDFC Bank, which is one of the largest players in the auto loan market, offers loans at 9-11 per cent depending on the category of the vehicle and the tenure of the loan.

Axis Bank is aiming to disburse Rs 1,000 crore auto loans in the coming quarter. According to Srivatsa, the bank’s auto loans book has been growing at 35 per cent an a year-on-year basis

“This promises to be an exciting space with a lot of manufacturers coming up with new models,” said Srivatsa.

Faced with rising delinquencies and collection problems, ICICI Bank had more or less withdrawn from the auto loans market.

It is only in the past two months that the bank has re-entered the market.

ICICI Bank Managing Director and CEO Chanda Kochchar has said the bank is looking to grow its auto and home loan books.