After hiking deposit rates,private sector lenders are planning to raise their retail lending rates. Auto loans are the first segment to register a hike in interest rates. Kotak Mahindra Prime,a subsidiary of Kotak Mahindra Bank which primarily deals with funding passenger vehicle loans,on Friday hiked interest rates on auto loans by 50 bps across the board. Sumit Bali,CEO,Kotak Mahindra Prime (KMP),said,Our cost of funds have increased by 50 bps. There is a liquidity crunch in the market due to disbursements in 3-G auctions and BW auction. We just wanted to pass on the higher cost of funds to the customers. Typically,KMPs interest rates on auto loans currently vary between 9.50 and10.25%. Its passengers car loan book stood at around Rs 7,000 crore as on June 30,2010-11. Bali expects it to grow by 15-18% by the end March,2010-11. Kotak Mahindra Bank is also likely to increase its auto loan rates. According to a spokesperson,the bank will explore the option next week. KVS Manian,head,consumer banking,Kotak Mahindra Bank,told FE,There is a possibility of a 0.50% hike in auto loan interest rates. However,we have not yet taken any decision in this regard. The rates in the banks auto loans range between 9.5% and 10.25%. The second largest private sector lender,HDFC Bank,would also raise its auto loan interest rates by 0.50% in the next 7-10 days. "Borrowing rates have gone upwe are likely to raise our rates (auto loans) by 0.50% in the next 7-10 days," said Ashok Khanna,HDFC Bank's senior executive VP.
