The new scheme will initially be operational up to August 31 and could be extended, depending on the response, officials said. They added that the scheme was being reintroduced following demands from BAL dealers during the current season, which is usually seen as being a slack period due to the monsoons. The timing of the scheme is such that it is expected to bring in volumes at a time when these are usually low.

BAFL had launched the 9 per cent scheme in July 1997 and it was open till March 1998. This had boosted BAFL's business threefold, allowing it to breach the 40,000 vehicle sales mark, which it had been unable to break through. Although the scheme was launched in July, it really took off in August, allowing BAFL to notch up sales of 1.10 lakhs units.

BAFL officials admitted that they could extend the period this year too ifthe demand warranted it. They added that BAFL would be able to maintain its spreads and would strive to maintain its over one lakh vehicle sales.

They denied that BAFL's profitability would be affected since it is refunded through low cost funding from parent, Bajaj Auto. For the cash-rich two-wheeler major, this scheme represents risk free investment while its idle funds are put to work, officials claimed. They maintained that they had a low default rate and the percentage of arrears was also low due to strict credit appraisals.