Reduction in Interest rates :
A considerable demand from Corporate Sector


By

Dr.  Arun Kumar Singhal
Dean & Professor
Mangalmay Institute of Management & Technology
Greater Noida
 


Every body is having a watch on the investment market behavior. No body in this world is able to find out easily why, where and to what extent it will be down but there is other important aspect to consider and to think that Interest rates of Business Loans (Secured and Unsecured), Long Term and Short Term, CC limit, OD,  Bridge finance and Bill discounting have been going up rapidly (with major increased).

Impact of Interest rates is so wide and danger that business houses facing a difficulty in managing its survival in the market and among in its segment/ industry.

Production are not reaching to the scale of economies and cost inflation in the product / services is not giving a place of business for its survival.

There are several following questions in front of business houses today:

1.) is there a time to compromise with the quality of the product/ services to be maintain its economies of scale for its survival.

2.) Is there a need to mislead the consumers because increase in prices of the product / services will out the business from the competition market.

3.) Since liquidity is the main concern and due to not reaching at the production/ sales level as was targeted in the compliance / budget / CMA data of the company and submitted the banker for financing the short term / long term needs. Upon examining the liquidity & financial position of the company there may be a significant cut in the financing facility setup at the time of coming renewal of the same.

4.) To cope up with increased rates of interest, business houses may cut the employee cost.

I would like to conclude that due to rapidly increasing this problems Government and RBI have to take following some initiation:

1.) That interest rates should be focused and controlled upto an optimum level as per the purchase parity of business houses.

2.)  Banker will to consider business houses as a business partner not the profit making entity all time.

3.) There may be an impact of import and export policy and foreign currency and due to that there may be a situation of increase in the interest rates but banker should understand that they are not providing finance below the interest rates applicable on saving accounts/ Fixed Deposit and other long term and short term finance means obtained from its customers, therefore they should understand their role of support of economy of country.

4.) RBI should need to come out and to relax and to design financing package with which business houses would be able to fight at the time of liquidity shortage in the market.

5.) Government has to provide some tax benefit in the finance budget and relaxation in certain indirect taxes so that cost of production/ services should not get inflate.
 


Dr.  Arun Kumar Singhal
Dean & Professor
Mangalmay Institute of Management & Technology
Greater Noida
 

Source: E-mail December 20, 2011

          

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