Banks To Charge Higher Booking Rates For Nano
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Banks to charge higher booking rates for Nano

Marketing Executive

Banks may charge a differential rate for providing booking finance for the Nano with interest rates on booking finance being higher than auto loan rates for the car. The Nano, the eagerly-awaited Rs 1-lakh car from Tata Motors, is expected to become available for booking after March 23.

Bank of India — the latest lender to announce a package for funding the Nano — has already decided on booking finance rates. BoI’s normal auto loan rates, that become applicable once the car is hypothecated to the bank and delivered, would be around 10-11%. However, at the booking stage, ie, till the delivery of the vehicle, the bank will charge 12-12.5% interest.

“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,” said a senior Bank of India official. Private banks price their loans in the range of 11.75-13% for financing of new cars.


State Bank of India and Punjab National Bank have already announced a tie-up with Tata Motors. Earlier, SBI had announced that it was freezing interest rates on loans for purchase of all new cars at 10% for the first year. A Tata Motors spokesperson said: “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.”

PNB last week said it would charge between 10.50% and 11% for the Nano — 0.5% lower than its standard rates. “If the borrower meets with all the eligibility criteria, he will get the lower rate,” said a bank spokesperson. He, however, could not confirm the terms of providing booking finance. Booking finance gains significance because during the initial months, Nano would roll out only around 3,000 units per month.

In the run-up to the launch, bankers had been divided on pricing loans. Many bankers, largely from the public sector, feel that the car has the capacity to open up vast new markets as it is targeted at people who never owned a car before. Since the focus is on affordability, they felt that cheaper loans will be more effective.

Given the very large number of bookings anticipated, not everyone who books the car will get an allotment in the initial stages. Even those who get an allotment, may have to wait for 3-4 months for delivery. Public sector banks are eager to provide booking finance since they anticipate a huge demand for the Nano.

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