Financiers in India are facing a new set of challenges following the turmoil witnessed in the international credit market. The tightening liquidity scenario in India over the last year has increased the borrowing cost of financiers. Financiers, in turn, are passing on the increased in the cost of funds to customers. This increase in rates has been more prominent in the vehicle finance industry where interest rates have risen by 250-300 basis points (bps). This has raised concerns of credit for retail financiers.Further, the moderation in bank credit growth rates in 2007-08 appears to have been largely confined to retail segments such as housing, consumer durables and vehicle loans; of which vehicle loans comprises one-third of the country’s total retail loans. It is, however, possible that there could be a further moderation in the growth over the next year, which might primarily affect the retail segment.
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