BOMBAY: The reserve bank of India (RBI) today warmed banks against charging “usurious rate of interest” to industries saying that any violation of prescribed norms would be “viewed seriously.”
The RBI governor, Mr. S. Venkitaramanan, told reporters him that the RBI did not want industries to suffer because of “exorbitant” interest rates and “we may be forced to levy a cap” if they flouted the interested rate discipline.
“The Cap is like a warning to the banks,” he said.
Mr Venkitaramanan said the banks had in some cases, charged on about 25 t0 30 percent interest rate (against the minimum rate of 20 per cent adding that in pursuit of profit, they had made it “Usurious.”
Mr. Venkitaramanan also disclosed that norms and penal rates of interest were being reviewed and the interest rates would be brought down once inflation was contained.
Mr Venkitaramanan said “freedom does not mean license. The banks would only be following a shortsighted policy if they charge very high rate”.
He explained that it was possible to reduce interest rates unless the deposit rates were also brought down. With the present inflation rate being 12 to 13 per cent, the deposit rates could not be below that, he pointed out.
However, he said, a more radical structure would be evolved if the Narasinham committee report was, accepted by the government.
He said the RBI had clarified to be for deciding the range of rates between the minimum lend in grate as fixed by the RBI and the actual rates charged to different borrowers.
Unduly high lending rates adopted without regard to the credit ratings of the borrowers could cause disruption in the normal production process of the borrowing entities which were otherwise doing well, he said.
Article extracted from this publication >> February 28, 1992
