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2012-07-02

Cut lending rates, says survey while Union Bank lowers it by 300 bps

The Reserve Bank should immediately cut policy rates by 1- 1.5 percent as high interest rates are impacting the business of small and medium units, says a survey conducted by industry chamber ASSOCHAM. While in a parallel development, public sector lender

The Reserve Bank should immediately cut policy rates by 1- 1.5 percent as high interest rates are impacting the business of small and medium units, says a survey conducted by industry chamber ASSOCHAM. While in a parallel development, public sector lender, Union Bank of India reduced its interest rates for the micro and small enterprise (MSE) sector up to 300 basis points with effect from July 1.

A majority of small and medium units surveyed said high interest rates are impacting their business and RBI should immediately cut interest rates between 1 percent and 1.5 percent to help revive the growth of the industry, ASSOCHAM said.

"High rate of interests have a negative impact on business as the organisations droop under the burden of ever-rising lending rates," the survey revealed.

However, the rest of respondents said it will not impact their trade much as they are not heavily dependent upon bank finances, it said. The chamber said it has surveyed about 100 SMEs across the country.

On the other hand, aiming to boost MSME credit flow, "The revised interest rate structure for micro and small enterprises is quite competitive and attractive. This will be very much affordable to micro and small units and will help the bank to boost its MSE credit portfolio," Union Bank of India stated in a release.

Other measures taken by the bank are targeted credit flow to MSME, driven through 350 MSME-focused branches known as Business Banking Branches and through more than 30 clusters identified to cater to the credit requirement for exclusive activities under micro and small enterprises, it added.

RBI, however, in its mid-quarterly review of the monetary policy on June 18, has kept policy rates unchanged in view of rising inflation and global economic uncertainty.

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