RBI takes up jute industry funding woes with IBA

Indian Banks Association is of the view that with respect to certain schemes, the jute industry actually gets loans at cheaper rates than that is applicable to any other domestic loans.

Published - June 27, 2015 11:10 pm IST - KOLKATA:

The country’s central bank, the Reserve Bank of India has taken up the issue regarding the funding problems of the jute industry with the Indian Banks Association, after the 125-year old flagged this issue with RBI Governor Raghuram Rajan, seeking his intervention to improve the outlook of the bankers towards the traditional industry.

However its pleas seemed to have fallen flat.

The central bank has told the industry that the matter was taken up with the Indian Banks Association, which said that banks were open to finance new machinery for the jute industry subject to the proposal’s viability.

“Due to old inhibitions and wrong perceptions, the proposals of various jute mill companies are not being encouraged by the banks and even if loans are being sanctioned the rate of interest is generally higher than other industries” the apex industry association Indian Jute Mills Association Chairman Raghavendra Gupta had said in his letter to the RBI governor Raghuram Rajan.

“The jute sector is not looked at favourably by most financial institutions and commercial banks,” the IJMA said adding that a lot of question about the industry’s viability is raised when the companies approach banks for working capital loans and other credit facilities.

The over 125-year-old industry is looked at with suspicion, and benefits extended to other industries are ignored for the jute industry, the missive claimed.

The RBI in its reply said the IBA’s views were that with respect to certain schemes, the jute industry actually got loans at cheaper rates than that was applicable to any other domestic loans.

It also said that the Indian Banks Association has observed that the industry uses obsolete machinery which adversely impact capacity utilisation, resulting in higher production costs.

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