Industry body urges RBI to retire high cost debts

Friday, 11 July 2003, 19:30 IST
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CHANDIGARH: The PHD Chambers of Commerce and Industry (PHDCCI) has suggested the Reserve Bank of India (RBI) issue instructions to commercial banks and financial institutions to allow corporates to retire high-cost borrowings with minimum charges. In a representation to RBI governor Bimal Jalan, the industry lobby body said this would not only reduce the burden of interest on industry but also increase the liquidity of banks and financial institutions, which in turn would reduce the percentage of non-performing assets. "During the last five years many corporates obtained high-cost term loans from banks and financial institutions," PHDCCI said. "As interest rates have now softened, the corporates who want to prepay such high debt loans are facing a problem due to high prepayment charges of banks and the financial institutions." The chamber said at present banks and financial institutions demanded upfront premium as high as up to 50 percent of the differential interest benefit allowed. "The rates of interest so reduced are still on the very higher side as compared to prevailing rates of funds available to industrial units from other institutions." The PHDCCI representation has suggested no premium should be demanded for the advantage to the borrower. It also suggested the documented interest rate for the term loans should be automatically changed to the floating rate of interest and the interest rates to be charged to all borrower accounts on the present prevailing rate structure.
Source: IANS