Your dream car/bike won't get costlier by the RBI rate hike

A hike in policy rates was expected though it was not expected before the policy, Pawan Goenka, President-Automotive Sector, Mahindra & Mahindra, told CNBC-TV18 in an exclusive interview. "The announcement was a little bit earlier than expected." He doesn't necessarily see a rise in interest rates at retail showrooms because of the hike.

In an unexpected step, the Reserve Bank has raised its short-term borrowing and lending rates by 25 basis points each after market hours on Friday. It has raised the reverse repo rate to 3.5% and the repo rate to 5% with immediate effect. The measure is intended to anchor inflationary expectations and check price pressures. Inflation in March is expected to touch 10.2%.

An official at Maruti said the rate hikes were not seen coming so soon. "The fear now is that there would be a series of rate hikes."

According to Goenka, the main concern for the sector would be if retail finance rates went up. "It will have an adverse impact on sales given that we just have had a 2% hike in excise and an increase in cost because of emission norms from April 1. So, this will be like a triple whammy."

But Ravi Sud, CFO, Hero Honda Motors said, the move will not impact two-wheeler financing at all. "For the last couple of years, two-wheeler financing has been particularly low. From 55-60%, it is already at 25-30%." He said interest rates never went down as far as two-wheeler finances are concerned. He expects a further 25 bps hike in April.