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.
  

