The Hindu Business Line : ‘Individual banks will decide on interest rates for SMEs’

Mumbai, Nov. 28 The Reserve Bank of India on Friday took stock of the liquidity position in the banking system and problems being faced by small and medium enterprises (SMEs) and exporters in a consultative meeting with select bank chiefs.

Even as the meeting was in progress, the police rushed into the central bank building as there was a security alert about threat to key installations from terrorists in the Mint Street/ Ballard Estate area, where the Western Naval Command also has its head quarters.

Among those who participated in the meeting with the RBI Governor, Dr D. Subba Rao, include the State Bank of India Chairman, Mr O.P. Bhatt; Bank of India Chairman & Managing Director, Mr T.S. Narayanasami; Punjab National Bank CMD, Mr K.C. Chakrabarty; Canara Bank CMD, Mr A.C. Mahajan; Bank of Baroda CMD, Mr M.D. Mallya; Union Bank of India CMD, Mr M.V. Nair, Indian Overseas Bank CMD, Mr S.A. Bhat; ICICI Bank MD & CEO, Mr K.V. Kamath, and the Axis Bank Chairman & CEO, Dr P.J. Nayak. Bankers pointed out that the liquidity in the system was reasonable to meet the genuine needs of the productive sectors.

“While banks are lending to the SME and export sectors, there are some operational problems and we appraised the RBI about these problems,” said Mr T.S. Narayanasami, who is also the Chairman of the Indian Banks’ Association.

“Issues such as re-schedulement of SME loans in deserving cases and extending the time period for which concessional credit is available to exporters in the post-shipment leg were discussed,” said Mr M.V. Nair, CMD, Union Bank of India.

Bank chiefs also took up the demands put forth by the MSME (Micro, Small and Medium Enterprises) Associations with the RBI. Some of the demands of the associations are subsidised interest rates, higher loan to value (of inventories) ratio, relaxation in the asset classification norms, whereby a loan should be categorised as non-performing after 180 days as against the current 90 days and so on.

“The demand for lower interest rates for SME customers is bank specific and will have to be decided by individual banks,” said Mr Narayanasami.

Some of the other issues, which involve regulatory dilution, would be considered by the RBI, he added.

In view of this meeting, the IBA management committee meeting scheduled to be held today has been postponed for December 1.