Uttarakhand SMEs call for cut in interest rates

With the Reserve Bank of India (RBI) set to review its monitory policy by the end of the month, small and medium enterprises (SMEs) in Uttarakhand have demanded cut in interest rates to sustain themselves.

In a representation to the apex bank, the Industries Association of Uttarakhand (IAU), a body of micro, small and medium enterprises in the state, has called for reducing interest rates from 14 per cent to 12 per cent of the benchmark prime lending rate (BPLR).

"The high rates of interest are a cause of concern for SMEs and can be responsible for slowdown in industrial growth," Pankaj Gupta, president of IAU, said.

Gupta said that since inflation is now hovering below RBI's tolerance level of five percent, the interest rates could easily be reduced.

"The reason for hiking interest rates was because of high rate of inflation that is now well below its target of five percent for this fiscal," said Gupta.

The industry association also urged the RBI to come out with a plan to tackle excess liquidity flows.

Noting that 40 percent of funds were reserved for the priority sector, it has also called for reserving five per cent funds for the state governments which would give them the freedom to include the sectors which they identify as the growth drivers.

For Uttarakhand, the IAU said tourism and tourism related infrastructure are being seen as the focused areas which may drive growth of the state.

The association also said that clearing rules were not being followed due to which funds were not available in time. The monitory policy should also strictly address this problem which otherwise retards the growth of small and medium enterprises, it said.

The credit-guarantee fund scheme and credit-rating scheme, which had been introduced for enhancing flow of credit to the SME sector, were still not finding favour with banks.

The start-ups were being refused the benefit of these schemes, it said, demanding intervention of the RBI. There is also need to review credit requirements of some important sectors like agriculture, food processing and automobiles, IAU said.