Tata Nano: An opportunity for financers to boost business
By Vaibhav Aggarwal
Mar 25, 2009
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The Tata Nano that was commercially launched on March 23rd brings an opportunity for banks and other lending institutions to scale up their business in the middle of the slowdown.

The car booking is going to start from April 9th and banks are only funding the booking amount as of now. They are not extending credit for the car.

However the country's largest lender, State bank of India (SBI) has entered into an exclusive agreement with Tata Motors for the financing the cheapest car. The bank will accept a non-refundable Rs 2,999 as adjustable charges towards the booking amount on allotment to be adjusted against interest payments for the funding.

The booking amount of the car is likely to be 70-80% of the price tag of the car. Around 1,350 branches of SBI from 850 cities will assist in the booking of Tata Nano. Booking forms will be distributed and application forms with the booking amount will be collected through these branches.

SBI said that it would finance the entire booking amount of the Nano at an interest rate of about 10%.

Besides SBI, other private banks such as ICICI Bank and HDFC Bank are also set to fund the Rs 1lakh car. These banks are expected to keep the booking amount at around Rs 3,000. This would be an interest component that would be non- refundable whether one gets the booking or not.

The banks are just dealing with the funding of booking amount and it will decide on the financing at a later stage. For now they are focusing on the booking as the allotment is going to take another three months and the banks will chalk out the financing schemes after the allotment.

ICICI Bank's head of auto loans, NR Narayanan said, "The percentage of funding and the interest rate to be charged will depend on the profile of the customer."

The Tata Nano is currently being manufactured at the company's Pantnagar plant in Uttarakhand in limited numbers.


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