A mere token cut in base rate by State Bank of India, the prime lender of loans to Tirupur knitwear industry, despite RBI reducing the police repo rate after a gap of nine months, has come as a disappointment for loan seeking industrialists.
The SBI had announced, subsequent to reduction of repo rate and Cash Reserve Ratio by 25 basis points each on Tuesday, its intention to bring down the base rate by just 5 basis points (from 9.75 per cent to 9.7 per cent) with effect from February 4.
G.R.Senthilvel, secretary of Tirupur Exporters and Manufacturers Association, told The Hindu that these types of paltry cuts were ‘inconsequential’ for industries such as knitwear where the entrepreneurs had been looking badly for loans at lesser cost to meet the capital expenditure needed for capacity expansion.
“Why banks are interested only in raising the interest rates in corresponding scales every time the RBI hike the repo rates but not willing to take the cue from the apex bank to correspondingly reduce the base rates when there has been a slash in repo rate and that too the one which happened after a gap of nine long months?” he quipped.
The technocrats and industrialists were of the view that if SBI, with a better financial leverage than most banks, had brought down the base rate only by 5 basis points there looked only a remote possibility of other banks reducing the rates.
“It means that the RBI’s intention of reducing the repo rate, the rate at which the apex bank lends to banks, for triggering industrial growth through investments is going to get wasted one more time,” Raja M. Shanmugam, a leading exporter in Tirupur cluster, pointed out.