Published on Wed, Oct 08, 2008 at 16:55 | Source : CNBC-TV18
Updated at Wed, Oct 08, 2008 at 18:03
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India Inc finds cheaper ways to borrow
More corporates like oil companies are taking loans through cash credit limit. Cash credit limit is similar to savings account which companies use for their working capital. The banks are offering loans at prime lending rate or 2 bps below PLR. So it’s anywhere between 12-13%.
Tight liquidity conditions and higher interest rates are driving corporates to withdraw loans through the cash credit limit. This has put banks in a dilemma as they find it difficult to finance these loans at the current rates.
Here is a verbatim transcript of Gopika Gopakumar's comments on CNBC-TV18. Also watch the accompanying video.
More corporates like oil companies are taking loans through cash credit limit. Cash credit limit is similar to savings account which companies use for their working capital. The banks are offering loans at prime lending rate or 2 bps below PLR. So it's anywhere between 12-13%.
Now bankers say that companies have rarely borrowed this type of loan in the last four-five years. This is because cheap short-term loans at much lower rates were in demand. But now with rising interest short-term loans have become more expensive and therefore cash credit limit has become attractive for companies. Bankers say that this has put more pressure on banks because of the inability to sanction new loans. So with banks themselves borrowing at 17% from call money market, it could be difficult for the banks to arrange such loans in future.
Here is a verbatim transcript of Gopika Gopakumar's comments on CNBC-TV18. Also watch the accompanying video.
