KASSIA urges RBI to ensure commercial banks do not raise MSME lending rates with hike in repo rate

New Delhi, Aug 2 (KNN) Concerned about the MSME lending rates with the hike in repo rate by Reserve Bank of India (RBI), Karnataka Small Scale Industries Association (KASSIA) has requested the RBI to ensure that the commercial banks do not raise interest on SMEs.

KASSIA in its press release said, though the RBI has good reasons to be concerned about inflation and other macro-economic related issues in effecting the rate hike by 25 basis points, the MSMEs are worried that the commercial Banks will use this as an excuse to hike rates disproportionately to the repo rate increase making finance costly for the MSMEs which are already in trouble.

“We urge the Reserve Bank to ensure that the commercial Banks do not raise interest on SMEs in particular as any hike is lending rates will be harmful to the SMEs  and the economy”, said KASSIA.

The association also requested the RBI to maintain the current rates to the MSMEs and further reduce it keeping in mind the need to revive and speed up economic growth so that the economy attains its full potential.

RBI's Monetary Policy Committee (MPC), headed by governor Urjit Patel, on Wednesday hiked the policy repo rate by 25 basis points (bps) to 6.50 per cent in its third bi-monthly policy meet.

It may be noted that the central bank raised repo rate by 25 bps to 6.25 per cent in June, marking the first hike by the MPC in the last four years.

RBI, in its policy statement, said that the risks to its 4 per cent inflation outlook has increased since its last meeting in June on account of rising trade tensions. 

In its assessment, RBI said, “Since the last meeting of the MPC in June 2018, global economic activity has continued to maintain steam; however, global growth has become uneven and risks to the outlook have increased with rising trade tensions.”