Cut bank rates to revive MSMEs: CII

NEW DELHI: Industry chamber CII has asked the Reserve Bank to cut interest rates including repo rate so that micro, small and medium enterprises (MSMEs) could borrow at competitive rates.

"Cut in repo rates by 1 to 1.5 per cent will not only help MSMEs manage their increasing costs but also create investment demand in the economy," CII Director General Chandrajit Banerjee said.

High interest rate is a major obstacle to accessing finance for growth of MSMEs and majority of the units in the sector are using private equity as alternate source for medium to long-term funding, a CII poll said.

The other hurdles to access finance are delayed suppliers' payment and cumbersome bank paperwork, it said adding that reluctance to lend by banks and their strict collateral requirements are also obstacles.

As per the poll conducted on over 150 CEOs of MSMEs, 78 per cent are using private equity for alternate source of finance for medium to long-term funding, it added.

On the impact of increased cost on profitability, 35 per cent of the MSMEs said it would be eroded by about 10 per cent in the current year, while 41 per cent opined that the losses would be in the range of 25 per cent.