The Federation of Automobile Dealers Associations on Saturday wrote to Reserve Bank of India Governor Sanjay Malhotra, urging immediate regulatory intervention to address the delayed transmission of interest rate cuts by private sector banks to automobile borrowers.While praising the RBI’s rapid repo-rate reductions, FADA highlighted that the benefits are not reaching the auto retail sector in full, with public sector banks implementing rate cuts promptly, but many private lenders citing internal cost reviews to delay the process.FADA also called for the RBI to enforce a strict, time-bound pass-through of policy rate changes, mandate public disclosures of cost-of-funds calculations, and conduct a focused review of private banks' lag in passing on repo-rate benefits to auto-loan customers.The association also raised concerns over the inconsistent application of MSME benefits to auto dealerships, workshops, and service centres eligible under the Udyam framework. FADA demanded clear RBI guidelines mandating concessional lending rates, priority sector classification, and improved access to MSME schemes for auto-retail MSMEs.Further, it urged the extension of the Credit Guarantee Fund Trust for Micro and Small Enterprises to authorised auto dealerships and workshops. Currently excluded, these businesses could benefit from collateral-free lending of up to Rs 5 crore, enhancing liquidity and investment..Automobile Retail Sales Grow 4.84% In June 2025: FADA.FADA also flagged the issue of banks disbursing incentives directly to dealership staff, bypassing authorised dealership accounts—a practice the body says undermines governance, dealer autonomy and internal HR protocols. It called on the RBI to ban direct payouts and enforce incentive routing through dealerships.The letter also called for a reduction in the risk weight on auto loans—currently 100%, compared to 40% for home loans—arguing that vehicles offer strong collateral value. Lowering this risk weight, FADA said, could spur a 20% rise in auto-loan disbursements over five years. It also proposed including rural auto loans and multifunctional vehicles in the agriculture-linked priority sector lending category.To support India’s clean mobility goals, FADA recommended that RBI promote easier EV financing through dedicated refinance lines, long-tenure loan products, and interest subsidies.The association further requested rationalised GST on used vehicles, capped credit card transaction fees, and improved loan access in Tier-2/3 towns. Lastly, it proposed a dedicated Auto-Retail Working Group under the RBI to monitor credit flow and address sector-specific challenges..FADA President Warns About Possible Automotive Plant Shutdowns Due To China’s Rare Earth Curbs