CRR hike will hit SMEs hard: GCCI

Ahmedabad, Aug 2 (UNI) The new credit policy unveiled by the RBI recently will have adverse impact on SMEs with hike in cash reserve ratio drying up loanable funds upto Rs 16,000 crores from the banking system, according to Gujarat Chamber of Commerce and Industry president Paru Jaykrishna.

Adverse impact of CRR hike will harden interest rate but not the deposit rate which will have a downgrading impact as many banks have started lowering deposit rates by 0.5 per cent, she said in a press release here. She said that it is argued that this has been done to check inflation at around 4 to 5 per cent, but, looking to the inflow of foreign funds, the pressure on inflation may continue.

She said now all banks would have to maintain 7 per cent of their deposits with RBI as CRR and on these deposits banks would receive interest only on 3 per cent of the deposits at bank rate which is 6 per cent at present while no interest is paid on the balance 4 per cent. Thus the bank margins are impacted to that extent and ultimately banking sector will resort to increase in various service charges.

Ms Jaykrishna said large units get their required funds through market sources whereas small and medium units will have to depend upon banking funds, and increase in interest rate will adversely impact on their competitivenesss.

UNI