Chidambaram wants more loan rate cuts

RATE CUT: Chidambaram said there is a scope for reducing bank interest rates.

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Keywords: Interest Rate, Chidambaram

New Delhi: Just days after a please-all Budget, Finance Minister P Chidambaram has said there is a scope for reducing bank interest rates.

This comes after the tax concessions announced in this year's Budget. Chidambaram said this on Tuesday in his post-Budget interaction with industry chamber CII.

But he added that the final decision on the cut in rates will rest with the RBI which has increased lending rates over the last two years to control inflation.

There was no immediate response from the RBI to the minister's comments.

“I think here is scope for deficit rates and interest rates to drop having said that the interest rate is the most effective way of cutting inflation,” Chidambaram said.

Although the Government conveys its views to the Reserve Bank privately, he said the RBI Governor would be reading the news reports and will respond appropriately.

The RBI in its monetary policy review had kept all policy rates intact, but had advised banks to reduce their net interest margins, following which a number of banks including market leader SBI cut interest rates.

The RBI, Chidambaram said, tries to maintain growth with reasonable price stability.

Responding to the demand of industry that financial institutions should provide liberal loans for purchasing consumer goods, the Finance Minister said, "We are pushing banks to give loans to retail consumers".

In addition to banks, he added non-banking finance companies also provide consumer loans.

He said during his meeting with industry and bankers, some corporates had complained that PSU banks were charging as high as 22-24 interest on consumer loans. "I have asked for the proof, but nobody has produced any evidence," he added.

(With PTI inputs)