Sops to NBFCs to push demand: Auto firms

The RBI rate cut has brought some relief to the automotive industry, which is reeling under its worst-ever slowdown in the past two decades.

Industry stakeholders claim that the measures to improve credit flow to NBFCs from the banking sector – increasing the counter-party limits to NBFCs and enabling priority sector lending through NBFCs – should help in quenching the latter's thirst for funds.

The shortage of liquidity has been one of the primary reasons for the slowdown in the automotive sector for the past over one year. 

V S Parthasarathy, Group CFO, Mahindra & Mahindra, said RBI has made the real “cut” by giving a clear cut commitment to keep the banking system flush with liquidity. "This should enable monetary transmission, thereby making this rate cut a 'cut above the rest," said Parthasarathy. 

A senior executive with a Maruti Suzuki showroom in Mumbai said the rate cut will simply help in bringing more liquidity into the market, and help in improving market sentiments, which, in turn, will help the automotive industry.

However, some others are sceptical and claim that a lot needs to be done to bring the automobile industry back into running. 

According to Sridhar V, partner, Grant Thornton India LLP, rate cut could be one of the stimuli impacting the sector positively. "However, this alone may not be enough to significantly improve growth. Other factors, including tax measures, will be essential to see a revival in the sector," said Sridhar.