Any policy rate hike by RBI to impact SMEs: PHDCCI survey

Any hike in short-term borrowing and lending rates by the RBI will go against the interest of small and medium enterprises, as it will increase their production costs and hamper their competitive advantage, a PHDCCI survey said.

The high cost at which credit is made available to SMEs is the foremost impediment to enhancing their growth and competitiveness in domestic and global markets, the survey, based on the responses of 200 SME entrepreneurs, said.

"The RBI should desist from raising interest rates in the quest of curbing inflation, as this would raise production costs and hamper the competitive advantage of SMEs," the PHD Chamber of Commerce and Industry (PHDCCI) survey said.

The RBI has been tightening its monetary policy since February this year to control inflation. In its monetary review last month, it raised the short-term lending and borrowing rates by 25 basis points each.

The RBI will review the monetary policy again in September, amid spiralling inflation.
    
The chamber suggested that the lending mechanism of banks should be streamlined to help the sector.
    
"Delays in sanction, renewal, disbursement of loans and documentation procedures should be avoided," it said.
    
There are about 2.6 crore micro, small and medium enterprises, which contribute about 45 per cent to the country's manufacturing output and 40 per cent to exports.