After pitching for a two per cent cut in RBI’s interest rate, Commerce Minister Nirmala Sitharaman has said banks have not sufficiently understood the problems faced by Small and Medium Enterprises (SMEs), especially those related to high credit costs.

Responding to Twitterati on the issue, the Minister said: “The argument here is 1. Banks haven’t been understanding enough of #SMEs. 2. High interest rates for long period.”

Interest rate 

Demanding a lower interest rate regime, Sitharaman had said last week: “I still hold that the cost of credit in India is high…Undoubtedly, particularly MSMEs, which creates a lot of jobs contribute to exports… are all hard pressed for money and for them, approaching a bank is no solution because of the prevailing rate of interest. I have no hesitation to say, yes 200 basis points, I would strongly recommend,” she said.

Sitharaman also wanted the banks to entirely pass the benefits arising from RBI’s lower interest rate regime to the industry. She said she will ask the Finance Ministry to raise the issue with the RBI and banks.

Citing rising inflation, RBI has kept its key interest rate at 6.5 per cent since April this year. The central bank is slated to hold its next policy review on October 4.

Source: The Hindu