Simor blamed the continued slowdown in corporate lending, even as the economy grows, on banks’ low propensity to take risk, caused in part by a financial sector levy introduced last year. A lower base rate would be good only for those companies that already have access to credit, namely big companies, he said. It would not change the situation for SMEs that banks consider too risky to lend to, he added.
The effect of rate changes on corporate lending is also muted by the fact that almost 70% of corporate lending stock is denominated in foreign currency, he noted.
Government guarantees for corporate borrowers could be a temporary solution to sluggish corporate lending, Simor said. About one-fifth of SME loans at present are backed by a state guarantee.
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