New Delhi : Finance minister P. Chidambaram Tuesday said private sector banks would have to reduce lending rates after state-owned banks cut interest rates earlier this month.
“After the public sector banks slashed lending rates, I have no doubt that they (private banks) will get a tough competition and will have to reduce lending rates sooner than later,” Chidambaram told reporters here.
The cost of credit for households and the corporate sector came down after the State Bank of India (SBI), the country’s largest bank, and most public sector banks cut prime lending rates (PLR) by 75 basis points Nov 6.
Taking a cue, private sector banks had also promised similar steps, but are yet to formally announce any rate cut.
The finance minister also reiterated his stand that the Indian economy is nowhere near recession and will register a growth of 7 percent in the current financial year.
“Let me assure you our economy is growing positively. Our banks are 100 percent safe, deposits of banks are growing, and we will take responsive steps as and when required,” Chidambaram said.
The finance minister attributed India’s double digit inflation to the steady rise of global crude prices from $27 a barrel in the middle of 2007 to $147 this June, before it began falling again. “The increasing oil prices in the international market triggered price rise of other essential commodities,” he said.
“I have sacrificed Rs.31,000 crore (Rs.310 billion) of tax money even after the budgetary relief to balance the inflation. With the international oil prices coming down, inflation will also come down.”
Chidambaram said he was confident the rupee would get stronger against the dollar in coming days. “The rupee value has gone down as FIIs (foreign institutional investors) have sold a significant amount of portfolio and are withdrawing money from Indian markets. But soon things will change.”