Economy

Further hike in lending rates may lead to small units' closure

| | Updated on: Feb 06, 2011

The small scale units are feeling the severity of interest burden already and are threatened with the prospects of a further hike in lending rates.

Their survival is at stake, coupled with the increase in raw material costs and rentals, said Mr K.R.Thankaraj, President, Tamil Nadu Small and Tiny Industries Association (TANSTIA), Chennai.

Speaking to Business Line here , he said that despite the sector's significant contribution to national production, employment and exports, it has been put to severe stress repeatedly and no timely help is extended by banks either.

Mr P Sitaraman, Vice-President, Maditssia, added that in the last one year alone, the lending rate of interest rate has been raised three times, from 12 per cent to 13.5 per cent and the sector is stagnating with nil prospects.

Exit policy

Continuing, Mr Thankaraj said that to facilitate hassle-free bank loans, registration and a rating system for the sector can be made mandatory.

An exit policy is necessary, at least for units that have no collateral.

As in Delhi and in the IT industry, the small units must be encouraged to work in a flat system of a multi-storey building, so that the rentals do not become a bother every year , he said.

He, however, felt confident that the sector would face the difficult times successfully and bounce back vigorously through taking to a cluster approach.

Published on February 06, 2011

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