The new hinterland of car sales is the cities like Kanpur, Lucknow and Allahabad, for instance, in addition to the North East and certain pockets in central and east India. The car financiers now have a greater focus on metro markets and premium vehicles, where risk factors are comparatively lower.

This new creamy-layer focus adopted by the car finance biggies could also make them lukewarm to the Tata Nano when it debuts in October of this year. The increasing number of defaults and the current credit environment ,has made this a very high-risk segment. ICICI, the biggest player in the car loan finance business, has "re-jigged its portfolio" to cut back exposure in "high-risk segments" of the hinterland. Other players like Kotak have become "cautious" as defaults increase. When the big financiers pull back their non-creamy layer schemes, the focus is automatically back to metro markets and low-risk customers.

The reduced geographical spread of the car loan finance is part of a portfolio management strategy which examines locations and creditor profiles for profitability aspect . With the hike in interest rate and growing number of defaults, the mix and match is changing, the exposure in premium segments is becoming more and it has cut down on delinquent locations or profiles. However, despite of high input costs and fuel prices, car manufacturers in the country managed to post six percent growth in sales in the month of June. The domestic passenger car sales recorded a hike of 6.1 percent increase while sales of motorcycles went up by 8.2 per cent in that period.

The credit policy announced by RBI has brought a drastic hike hike in Cash Reserve Ratio (CRR). CRR is the proportion of funds that the banks are bound to keep with the central bank. There is a general expectation that the policy shall stall the pace at which the interest rates or lending rates were expected to reduce and there will be a hike in the car loan rates. This may take some time (around 10-15 days) to see the effects of the credit policy on the car loan front and consumers are asked to wait and watch for the best car loan.

There is cause for some worry if the prospective buyers go by what banks have to say regarding best car loans. With a hike in the CRR, some amount of liquidity is going to be sucked out of the banking system. As this happens, there is a definite chance of some stress on the prevailing interest rates. The stress is going to result in an increase in interest rates. In such a circumstances, car manufacturers are hopeful that better product and marketing initiatives will help them overcome the any upward trend in interest rates that may hamper the sales of the cars.

The credit policy of the apex bank will have immediate impact on availability of best car loans as CRR is one of the important cogs in deciding market rates. In order to keep things on track, both the banks and the car manufacturers should take some positive steps and diversify the car market as well.