INDIAN RATE CUTS TO SPARK INDUSTRY, AGRICULTURE
The Indian Finance Ministry's
announcement in Parliament yesterday, changing the nation's
interest rate structure, will benefit industry and agriculture
by providing loans at lower interest, bankers and brokers said.
    The changes, effective today, included reducing commercial
bank lending rates that have ranged between 15 pct and 17.5 pct
by one percentage point.
    New rates, which affect both Indian and foreign banks, also
include a one percentage point gain, to an annual 10 pct, on
deposits of two years or more but less than five.
    Bank deposits of five years or more carrying 11 pct
interest have been abolished.
    Bankers said the interest rate modifications reflect the
government's concern to reduce the costs of borrowing and help
improve world competitiveness of Indian goods.
    There is likely to be a shift to short-term bank deposits
by long-term depositors, bankers predicted. This will create
the flexibility to draw and re-invest funds in either equity
shares or short-term bank deposits, they said.
    A merchant banker also said reduced manufacturing costs due
to lower lending rates are likely to boost the share market.
    Tata Steel, a trend setter on the Bombay Stock Exchange,
opened today higher at 1,040 rupees against yesterday's closing
of 1,012.50 rupees.
    A stockbroker said investors may be less enthusiastic now
to buy convertible and non-convertible debentures because the
Finance Ministry has reduced the annual interest rate to 12.5
pct and 14 pct respectively from 13.5 and 15 pct respectively.
    "But overall debenture prospects remain bright because the
rates of interest on them will still be higher than what banks
pay for deposits of similar maturity," a merchant banker said.
 REUTER
