New Delhi: Union Minister Nirmala Sitharaman today said banks are not fully understanding the problems faced by small and medium enterprises, whose performance has been hit by the high interest rate regime.


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Twitterati drew the Minister's attention to the issue saying it is for the industries to manage their funds and banks can only lend.


Sitharaman replied: "But, the argument here is 1. Banks haven't been understanding enough of #SMEs. 2. High interest rates for long period".


The Commerce and Industry Minister had last week pitched for a 2 per cent cut in interest rate by the Reserve Bank to help the cash-starved MSME sector.


"I still hold that the cost of credit in India is high. Undoubtedly, particularly MSMEs, which creates a lot of jobs contribute to exports... Are all hard pressed for money and for them, approaching a bank is no solution because of the prevailing rate of interest. I have no hesitation to say, yes 200 basis points, I would strongly recommend," she had said.


RBI, which has maintained key interest rate at 6.5 percent since April this year citing inflationary concerns, is scheduled to hold its next policy review on October 4.