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Increase in repo rate will put ‘brake’ on the growth of automobile industry, FADA fears

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Repo Rate Impact on Auto Industrty: Vehicle dealers’ body FADA on Wednesday said the hike in repo rate will put a “brake” on the growth of the auto industry to some extent and affect the two-wheeler sector, which is already going through a slowdown. The Reserve Bank of India (RBI) on Wednesday increased the repo rate by 0.40 percent. With this decision, the monthly installments of other loans including housing, vehicle will also be affected.

Federation of Automobile Dealers Association (FADA) President Vinkesh Gulati said in a statement, “The RBI’s move to hike the repo rate by 0.40 per cent has clearly shocked everyone. This move will curb excess liquidity and make vehicle loans costlier.” He added that the passenger vehicle segment may bear the blow due to the long waiting period, but the two-wheeler segment will not be able to bear another blow of higher vehicle loan cost, he added. .

Gulati said the two-wheeler sector is already badly affected due to poor performance in the rural market, hike in vehicle prices and high fuel cost. According to FADA, two-wheeler sales declined by four per cent to 11,57,681 units in March 2022 from 12,06,191 units in the same month last year.

Yesterday RBI increased rates
The Reserve Bank of India yesterday increased the repo rate by 0.40 percent to 4.40 percent and along with it the cash reserve ratio has also been increased by 0.5 percent. Now the CRR has increased to 4.50 percent. There is a possibility for banks to increase home loans, auto loans etc., which will have a big impact on the automobile industry.

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