'Cost of credit worrisome'

'Cost of credit worrisome'

Despite the Reserve Bank of India (RBI) reducing interest rate by 1.75% between January 2015 and October 2016, most of the companies of late have said that their cost of credit is “worrisome”.

A Ficci business confidence survey has found that on an average, the companies are paying an interest rate of about 11% on working capital loans and 11.3% on term loans.

In the present round, 39% participants reported cost of credit to be a “bothering factor”, the survey said.

The survey was conducted during the month of March and April, and saw 185 companies participating in it.

Both the government and the central bank have taken a slew of measures over the past couple of years to moderate the lending rates. The RBI has revised down the repo rate by 175 bps between January 2015 and October 2016. Besides, the interest rates on small saving scheme were reset and marginal cost of funds-based lending rate was made applicable last year.

Earlier this year, some major banks did revise down their lending rates. Despite that the survey found a majority of respondents replying in negative on whether these moves have helped their cost of funds.

“Surprisingly, about 67% of the participants responded in negative. Further, out of the remaining who said they have been able to benefit from the decline in lending rates, the extent of benefit varied between 10 basis points to 200 basis points,” the survey says.

Feedback received on operational parameters reported mixed results. While a pick-up is anticipated in case of sales, employment and profits, outlook on parameters such as exports indicated weakening.

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