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Internal cash strapped companies soon may be easier access to credit, banks and financial institutions (FIs) is planning to cut interest rates in the next 2-3 months, if no significant improvement in the economic arena.

Several banks and financial intermediaries such as the State Bank of India (SBI), Punjab National Bank (PNB), Industrial Development Bank of India (IDBI) and the Life Insurance Corporation (LIC) Housing Finance have recently decreased interest rates on mortgages and car loans as specials for the upcoming holiday season. Industry experts believe that the reduction in interest rates could boost demand in the housing and auto sectors in the coming days.

"Sales car rose a healthy 31% in July 2009. With some banks bring down their interest rates on auto loans, car sales could increased further. This consequently, to car dealers, small-scale, like us, "said Vora H, Holder Kunal Services Auto, Mumbai.

SMEs need to cut Plrs

For small and medium enterprises, reduction of preferential interest rates (Plrs) by banks have more important that interest rates on any other. While many banks have reduced their Plrs in recent months, have done very aggressively. However, if economic recovery does not increase the pace soon, banks may look to reduce lending rates further.

"Monsoon weak together with turbulent global market scenario emerging as major obstacles in the path of economic recovery. This is affecting all businesses, especially small organizations like ours. In such circumstances, we are in need of loans from banks and financial intermediaries to maintain our business. If banks cut Plrs, borrowers like us, it would be easier to borrow, "said V Dagger, Uttam Electric and Trading Manager Company, a small maker of electrical equipment supplier in Kolkata.

Indeed, removal of bank credit has been reduced to the half in the first 4 months of the current year as high interest rates have discouraged many small business loans. To boost credit collection, banks may have to lower its interest rates soon.

About the Author:

David Parks is a well known author and has written articles on India Business News, B2B Portal, Investment Guide, suppliers, Manufactures and many other subjects.

Article Source: ArticlesBase.com – Banks, FIs May Cut Interest Rates Further