The Hindu Business Line : IBA: Work in progress for streamlining SME rating

BANKERS MEET: (from left) Mr S.C. Gupta, CMD, Punjab National Bank, addressing the Bankers-Borrowers Meet with Mr Sanjay Bhatia, President, PHDCCI, Mr Allen C.A. Pereira, Executive Director, Oriental Bank of Commerce, and Mr H.N. Sinor, Chief Executive, Indian Banks' Association, organised by PHDCCI in the Capital on Wednesday. — Kamal Narang

New Delhi May 30 The Indian Banks' Association (IBA) has said that work is in progress for streamlining the SME rating and that the whole process is expected to be completed in the next year or two.

"Many steps are being taken up by the banks to make the rating transparent and to ensure adequate flow of funds to the sector. Triple A ratings are also being given to the SMEs (small medium enterprises), which enable them to source funds at competitive rates," Mr H.N. Sinor, Chief Executive of the Indian Banks' Association said at a PHDCCI function here on Wednesday.

He added that work was in progress for streamlining the SME rating and will be completed in 1-2 years. "The IBA is also consider posting the rating criteria in its Web site," Mr Sinor said.

Interest rates

Clarifying that the higher interest rates charged by banks is not resulting in higher profit to the banks, he said the effort of the banks is to bring the operational cost to below two per cent.

"Banks are investing heavily in technology to reduce the transaction cost. It would take sometime for these measures to gain critical mass and the benefits accrued by such measures will be passed on to the customers. In the meantime, banks have to benchmark their interest rate on inflation. The expectation is that once the inflation is brought down to 4 per cent, the interest rate can pegged at to a single digit figure," he said. Mr Sinor observed that the banking industry has to come out of its present fragmented and small structure through consolidation and mergers to take on foreign counterparts. "Significant changes would take place in the banking landscape, including mergers of the public sector entities and consolidation of the banking operations, in the next 3-5 years to respond to the needs of the industry and to align with global banking operations, he said.

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