Rbi Cuts Peak Nbfc Rate To 12%

The Reserve Bank of India (RBI) today cut the maximum interest rate payable by non-banking finance companies (NBFCs) by 150 basis points to 12 per cent effective tomorrow. The move is in line with the central bank's easy monetary policy announced in the recent credit policy.

The apex bank in a press release issued today said the new rates will be applicable only on fresh deposits and renewal of existing deposits on and from tomorrow. The new rates will also be extended to miscellaneous non-bank companies (chit fund) and nidhi companies.

The central bank cut the bank rate by 50 basis points to 6.50 per cent and cash reserve requirement by two percentage point to 5.50 per cent.

NBFCs feel the change in interest rates will not have impact big players, but will make fund-raising difficult for smaller entities.

Said KVS Manian, chief operating officer, Kotak Mahindra Finance Ltd (KMFL), "Bigger players like us have a cost of deposit much lower than the 12.5 per cent level. But small players which raise funds on the basis of rate advantage and pay a very high interest. For them the lowering of ceiling interest rate will create a problem."