Auto loans likely to face downside risks

Auto loans likely to face downside risks
Highlights

With the countrys economic growth likely to be slower, fall in the rupee and globaltrade tensions, auto loans are likely to face downside risks, says a report

Mumbai: With the country's economic growth likely to be slower, fall in the rupee and global-trade tensions, auto loans are likely to face downside risks, says a report.

Global rating agency, Fitch Ratings, has forecast the country's GDP growth to slow to 7 percent in FY20, which may limit demand for commercial vehicles. In its sixth bi-monthly monetary policy review announced on Thursday, the Reserve Bank of India has projected GDP growth for 2019-20 at 7.4 percent. The agency expects the rupee to marginally depreciate to Rs 75 per US dollar by end-2019.

The rating agency in a note said a significant currency depreciation would increase the country's fuel prices, assuming stable US dollar-denominated crude-oil prices. This could hurt the operating margins of truck owners if higher costs are not passed on to customers, which can be difficult during stressful periods, it said. "If rising global economic risks result in a sharp decline in GDP or steep currency depreciation, delinquency rates for Indian auto-loans may rise," the agency noted.

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