Look who've taken away car duty cut

Mumbai: If you are a prospective small car buyer and happy to know about the excise duty reduction on small cars in the Union Budget, there are disappointing news for you.

Barely a week after the Union Budget was presented in Parliament, the bonanza offered on small cars almost stands nullified as leading banks have hiked their auto loan rates even as car dealers have effected drastic cuts in the discounts that they used to offer on various models.

On Monday, the ICICI Bank increased auto loan rates by 100 basis points with immediate effect.

While the interest rates of auto loans depend on car model, loan tenure, customer and even location, in case of a B-segment car such as Santro or Wagon R, the rack rate for a three-year loan has gone up to 11.75% from 10.75%, or Rs 3,000 more per lakh.

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Bank officials said they were compelled to revisit the auto loan rates as the bank has just increased its rates on bank deposits.

They argue that a customer anyway ends up paying much less than the rack rates as dealers generally pass on part of their subvention to customers in the form of discounts.

But the price cut in the Budget seems to have prompted car dealers to withdraw most of these discounts. Earlier these discounts ranged from Rs 8,000 to Rs 20,000 or even more. However post-Budget, most car dealers have reduced these discounts to bare minimum.

Which means people buying small cars after the Budget are now finding out that the cut in excise duties has not really boiled down to any reduction in the real car prices in the market.

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Meanwhile, there is good news for depositors of ICICI bank. The bank has hiked deposit rates by 50 basis points with effect from February 7. The bank had earlier increased deposit rates in mid-February by 50 basis points.

However, there has been no change in home loan rates, an ICICI bank official said, adding that the discount that the bank had been offering on certain categories of home loans have, however, been withdrawn.

It had hiked home loan rates by 50 basis points, effective from Februray 13. However, for the existing floating rate customers, the hike would be applicable from the next financial year, it had said.