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Slash in RBI's repo rate to help SMEs
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Bikky Khosla | 21 Oct, 2008
It was a positive move from the Reserve Bank of India (RBI) to slash repo rate by 100 basis points. This will not only reinstate the confidence of the investors, but will also help deal with the current financial uncertainty.
The move would be beneficial and will bring relief for the SMEs who were facing liquidity pressure till now. The decision will have a beneficial impact on the interest rates and will be a major booster for this already-battered sector.
The Indian economy was beginning to come under the pressure of global slowdown and a slash in the interest rate will definitely help in averting the downward pressure on the growth rate.
However as rightly pointed out by CII, a separate corpus needs to be created for lending to SMEs, as they stand to get disproportionately hurt by the non-availability of credit.
The Finance Ministry and the RBI need to take steps to ensure that SMEs are allowed credit at close to PLR rates and also to reduce the risk weights for lending to SMEs.
Most of the SMEs are now using private equity as alternate source for medium to long-term funding because high interest rate still remains a major obstacle to accessing finance. Above that, delayed suppliers' payment, cumbersome bank paperwork, reluctance to lend by banks and their strict collateral requirements are the other hurdles faced by the sector to access finance.
While the recent RBI's decision to cut the repo rate by 100 base points to bring it down to eight percent could translate into lower interest rates for SMEs, banks on the other hand need to do their bit to help this sector too.
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Export Against Cheque/Demand Drafts
Aravind Nair | Sat Nov 22 11:36:56 2008
TO THE ATTENTION OF INDIAN EXPORTERS
Dear All,
Be very very careful when you export shipments against receipt of payments through Cheques or Demand Drafts from foreign buyers. The Cheques / Demand Drafts may be fake ones, which you will come to know after a long time only.
As per the "standard practice" with Indian Banks, they instantly credit your account up on deposit of the foreign cheque / demand draft. Then they will send the cheque/demand draft for collection to the concerned foreign bank. As soon as the foreign bank receives the cheque/demand draft, they will return it (if it is fake). Immediately, your Indian bank will reverse the credit given to you or they will recover the amount from you. The problem is that it takes minimum 15 days to understand whether the cheque/demand draft is original or fake. By this time, you would have already exported the goods, on the basis of the earlier credit given to you by your bank.
Please be very careful when you receive cheque or demand draft from foreign buyers. To avoid this problem, when you deposit the cheque / demand draft, please advise your Indian banker "to credit your account only after the cheque / demand draft is honoured by the concerned foreign bank".
Many Indian Exporters are facing this problem only because of the "standard practice" of Indian Banks as mentioned above.
Please help the Indian exporters by forwarding this email to them.
Thanks
Aravind
Rupee repo rate cut
Kailash Chander Vashist | Wed Oct 22 07:08:53 2008
That is an unfortunate step RBI has taken as it'll keep the housing prices up which were going downward or say at actual/real price. Actually, it'll help corporate builders and big corporations only and not SMEs what is claimed.
Now, people will start buying flats/ plots on lesser interest and also white goods and vehicles. That's it.
All the big/ small business houses had invested their money in immovable properties and in share markets so the liquidation of money blocked. And no one wants to sell these on slashed prices.
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