The Hindu Business Line : Chamber for softer interest regime

THE PHD Chamber of Commerce has stressed the need for reduction in the interest rate structure, which continues to be on the higher side as compared to international levels.

In a press release issued on Friday, Mr P.K. Jain, President, PHDCCI, pointed out that that the chamber, in a meeting with the Finance Ministry, had suggested that the maximum interest rate should be fixed at one per cent over and above the Prime Lending Rate (PLR) for borrowers having top ratings, while for the others it should be at two per cent over and above the PLR. The PLR, according to Mr Jain, of the five major banks, was currently between 11 per cent and 12 per cent. "No bank should be allowed to fix its PLR above the upper limit and this upper limit should be indicated by the Reserve Bank of India," he said.

Mr Jain also mentioned that in order to bring down the transaction costs the banks should reduce expenditure through rationalisation of branches and staff and adopt newer technological tools. "Banks should also provide finance at a low rate of interest to farmers having less than two hectares of land. Crops should be allowed to be taken as security for working capital loans and the banks should emulate the experiment of the Grameen Bank in Bangladesh," he said.

Apart from this, the chamber also urged the banks to ensure that credit limits were sanctioned in full for SSIs, while ensuring themselves about the economic viability of the project.

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