By IANS
New Delhi : With inflation within manageable levels and the economy sustaining high growth, Finance Minister P. Chidambaram said he was in favour of banks lowering their interest rates to arrest slowdown in credit flows.
“I would like the deposit and lending rates to come down by 50 basis points,” he said on the margins of a meeting with chief executives of commercial banks here, adding that if monetary policy was supportive, interest rates could be moderated.
“Investment and consumption are the drivers of growth and we have asked banks to ensure that credit is not denied to the two sectors,” the finance minister said, even as credit off-take from consumers appeared to have slowed down this fiscal (2007-08).
“I have asked banks to increase lending to investors and consumers of consumer durables, non-consumer durables as there is sluggishness in these two sectors,” Chidambaram added.
His comments come ahead of the quarterly review of India’s monetary and credit policy for the current fiscal, which Reserve Bank of India (RBI), the central bank, is expected to conduct towards the end of this month.
Chief executives of banks, who participated at Friday’s meeting at the Vigyan Bhavan conference complex here, said they foresaw interest rates in the country remaining stable during the year.
“At least till April the rates look stable,” O.P. Bhatt, chairman of the State Bank of India (SBI), India’s largest commercial bank, said after listening to the finance minister.
The government-owned bank, he said, would finalise details for the proposed $4 billion rights issue by the middle of this month, having secured cabinet approval for the sale in November last year.
The government, which owns around 60 percent shares of the bank, is planning to invest around $2.5 billion by way of sovereign bonds to help it compete not just in the domestic market but also in its overseas operations.