Nano booking will give higher returns than FD

24 Apr 2009,

NEW DELHI: If you book a Nano, and unfortunately not selected in the draw, do not despair as your booking amount will fetch you better returns than even a fixed deposit. With RBI's recent reverse repo and repo rate cuts, banks have started slashing deposit rates, with fixed deposits now fetching lesser interest rates as against what Tatas will pay on your booking amount.

Booking for the Nano which opened on April 9, will close on April 25. Tata Motors will only be able to allot only one lakh cars in the first phase, within two months of closure of bookings. But for those who are not successful in getting the car in the first phase, have the option to retain their deposit on which Tata will pay an interest of 8.5% for people who have to wait between one to two years to get their Nano, and 8.75% for over two years.

As against this, a fixed deposit with a PSU like United Bank of India will fetch you an interest of 8% for 36 months. SBI at present offers 7.75% on deposits (below one crore) for a period of one to less than two years, while a deposit for two years to less than 1000 days, fetches interest of 8%.

"This is a great offer. Even if a customer is not successful in getting selected in the draw the first time, he can retain his booking amount over six to eight months on which Tata will pay more than what he would have earned if he had invested in a FD," a bank official said. The booking amount is Rs 95,000 for the base variant , Rs 1.2 lakh for middle and Rs 1.4 lakh for the top-end airconditioned model.

So it would make sense to retain the deposit with the bank till the time the next allotment takes place, say banking experts, if you are serious about buying the car, while at the same time earning a higher return (8.5%) than a fixed deposit in a bank (7-8 % or even lower if revised downwards over the next few days).

RBI on Tuesday lowered repo and reverse repo rates by 25 basis points each to 4.75% and 3.25% respectively. The move has triggered banks to slash deposit rates, with banks including ICICI slashing it by 25-50 basis points, and HDFC by 25 bps in select maturities.

"This is a first of its kind in the industry. Earlier when customers booked a Zen or Indica, the company paid interest only for the period the cars delivery was delayed," a senior executive with a private bank said.

The one-lakh car has met with an astounding response with most bookings coming for the top-end air-conditioned model, which carries a price tag of Rs 1.72 lakh (ex-showroom Delhi). The top variant in Mumbai is priced at Rs 1.85 lakh. Tata Motors has said that it would be able to produce only 50,000 units of Nano from its Pantnagar facility in Uttarakhand, until its dedicated plant at Sanand (Gujarat) starts production late this year.