Most SMEs get loans at high rates: Study

NEW DELHI: Most of the small and medium enterprises are not getting loans from banks at lower interest rates, despite the measures taken by the RBI to facilitate cheap finance to the sector, an industry survey said.

"The non-availability of funds at lower rates has increased the cost of working capital and lowering the competitiveness of firms in the global marketplace," the survey conducted by PHD Chamber said.

The study said only a small portion of units have reported a marginal reduction in cost of credit.

According to the survey, the credit availability from banks has not been cited as a major problem by about 78 per cent of the units, while about 22 per cent find it difficult to secure credit from banks.

"What is also worrisome is the likelihood of an increase in interest rates on account of the RBI's gradual policy shift towards monetary tightening to curb inflationary pressures building up in the economy," PHD Chamber President Satish Bagrodia said.

The chamber has surveyed 200 small and medium units. Respondents feel that expansionary monetary policy should continue to boost demand in the economy, the study said.

The RBI had cut key policy rates to ease the money supply to the industry in the wake of global downturn.

For improving cost and availability of credit to the sector, the chamber has recommended credit availability to the sector at prime lending rate, introduction of a separate stock exchange for SMEs and to develop a long-term corporate bond market.