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K. Giriprakash

Bangalore , Nov. 6

IN what could be a precedent setting move, Tata Motors has offered its shareholders its best selling Indica and Indigo cars at an unputdownable interest rate of sub-6 per cent triggering off speculation that another interest rate war is round the corner.

"Since the launch of the offer, we have received extremely good response," Mr V. Krishnan, Vice-President, Corporate Communication, Tata Motors, told Business Line. The offer works like this: All those shareholders associated with the company before the last AGM, July 21, who may want to buy either an Indica, Indigo, Sumo or a Safari under the finance scheme can avail themselves of the offer at an official interest rate of up to 5.9 per cent on reducing balance basis.

The offer can be availed through the finance scheme floated by ICICI Bank and Standard Chartered Bank till January 31, 2004.

For an Indica, the shareholder can avail himself of a maximum of Rs 3 lakh loan for a three-year tenure which works out to Rs 9,068 every month. For Indigo, the maximum loan amount is Rs 4 lakh and the EMI is Rs 12,092 for three years.

The processing fee has been waived off and those availing themselves of the offer will get a credit card free of charge. For a lesser tenure, the interest rates are lower.

The Tata Motors' offer follows a promise made to the shareholders by the Company Chairman, Mr Ratan Tata, during the last annual general meeting.

The latest offer from Tata Motors comes at a time when passenger car sales have been booming for the automaker boosted by Indigo's performance that has been selling at an average of about 2,300 units a month. While some of the carmakers and their dealers were quick to dub the offer a gimmick, others believe that the Tata Motors' offer might trigger a rate war sooner than expected.

"With more models being introduced in the C segment, interest rates will always be under pressure," Mr T. Venkataraman, Chief Executive Officer of Tafe Access, one of the leading automobile dealers in the South, said. He said the current rack rate was around 10 per cent and for the customers, it could be as low as 7 per cent on reducing balance, of course on a case-to-case basis.

But even this rate cannot equal the rate offered by Tata Motors, Mr Venkataraman said.

"Such an offer is unprecedented," he said.

The Kotak Mahindra Primus Executive Director, Mr Pankaj Desai, said some dealers offer rates as low as 6.5 per cent on reducing balance, again on a case-to-case basis.

"If you can negotiate further, the rates can be brought down further," he said. "As of now, the dealers can breathe easy as the offer is restricted to the shareholders," another dealer said.

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