The National Small Industries Corporation (NSIC), a major lender to small and medium enterprises, has said it will pass on the increase in interest rates to the borrowers.
"... we will pass on the cost to our customers," NSIC Chairman and Managing Director H P Kumar said while agreeing that the rising interest rates were causing hardship to the country's small and medium enterprises (SMEs).
The Reserve Bank of India on Friday, September 16 increased the policy interest rate (repo) by 25 basis points, the 12th hike since March 2010.
The key interest rates have increased by 350 basis points in the last 18 months.
For the SMEs, both availability and the cost of borrowings are the major problems.
"Globally loans are available at 4-5 per cent. In India the SMEs have to pay around 15 per cent," Kumar said.
Asked whether increasing interest rates would affect the bottom line of the NSIC as well, he said: "This won't affect our profitability as we will pass on the cost to our customers."
Kumar said that while interest payments for the corporation would increase to Rs 62 crore in 2011-12 from Rs 41 crore in the previous fiscal, this would mainly be attributed to the rising business volume.
For financing the entrepreneurs, the NSIC has tie-ups with Yes Bank, Axis Bank and Central Bank of India.
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