Higher booking rates for Tata Nano
By Vaibhav Aggarwal
Mar 13, 2009
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The much awaited Tata Nano is soon going to be on the roads and its booking is expected to start after March 23rd. However banks that are extending booking finance for the car are going to charge higher interest rates as compared to the auto loan rates.

Public sector, Bank of India (BoI) that is going to finance the Nano has also decided on the interest rates on booking finance. The bank is going to charge an interest rate of 12% to 12.5% at the booking stage of the vehicle and once the car is delivered to the borrower, BoI can pledge against it and therefore the interest rate will decline to somewhere around 10% to 11%.

A senior official at BoI said, "This is because during the pre-delivery period, the bank does not have any security and thus, it is like a clean loan. However, post-delivery, the car would be mortgaged to the bank and thus the rates will come down."

Others like State Bank of India (SBI) and Punjab National Bank (PNB) have already signed a deal with Tata Motors for financing the Nano. PNB announced to charge 50 basis points lower interest rate to the Nano buyers. The bank is offering loans for Nano at 10.50% to 11% interest rates. A spokesperson from PNB said, "If the borrower meets with all the eligibility criteria, he will get the lower rate." However the bank has not confirmed on the terms for booking finance.

Booking finance is going to gain importance at this time because during the initial months only 3,000 units of Nano would be rolled out per month. Also it is projected that all those people who have booked the car will not get the allotment at the initial stage. In fact those who have got the allotment will also have to wait for 3 to 4 months for the delivery.

PSU banks in the industry have been keen on providing booking finance due to the huge demand that is anticipated for the coming times. Tata Motors has recently tied-up with many state run banks to finance its passenger vehicle. "The company is making arrangements for the widest possible network to book the car, so that prospective customers can conveniently avail of booking facilities at their locations across the length and breadth of India," said a spokesperson from Tata.

Meanwhile bankers feel that the car is going to open up huge markets for them as it will mainly target on people who have never owned a car before. The banks will therefore offer cheap loans to the Nano aspirants that will mainly comprise of the people from middle income group focusing on affordability.

On the other hand, private lenders feel that risk factor in higher with this class and moreover delivery costs would be higher given the low value of the loan. Hence these banks believe that the loans should be priced higher. Most of them are offering loans in the range of 11.75% to 13%.


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