Loans likely to get cheaper as Govt prods banks to cut rates

New Delhi, June 10 (PTI) Home and other retail loans and
industrial lending may become cheaper soon as public sector
banks are likely to cut interest rates after the Indian
government Wednesday prodded lenders to provide credit at
reasonable rates to spur the economy.

"Our bank will decide on lowering interest rates by the
end of this month," country's largest lender State Bank of
India's (SBI) Chairman O P Bhatt told reporters after a
meeting between Public Sector Undertaking (PSU) bank heads and
India's Finance Minister Pranab Mukherjee here.

Expressing concern over non-availability of credit at
affordable prices from banks, Mukherjee said, "As a financial
intermediary, the banks have to stand-by to provide credit at
reasonable rates. This is an area of concern in many quarters
both within the government and outside," he said.

He said reduction in key rates by Reserve Bank of India
(RBI) is not getting adequately reflected in the reduction of
prime lending rates by banks. "I would urge the banks to
address these concerns expeditiously and in adequate measure.
This will help restore the environment for rapid growth and
ensure that the growth process benefits all our people,"
Mukherjee said.

To a query as to how much the rates could be cut, the
finance minister told reporters, "All possibilities will be
explored.I can't quantify it (rates cut)."

Canara Bank and Corporation Bank also echoed Bhatt's
statement on rate cuts. The second largest PSU lender PNB,
however, said it does not see any revision in interest rates
in near term as its rates are the lowest in the market.

Asking banks to cut interest rates to spur economic
growth assumes importance in the wake of India's Prime
Minister Manmohan Singh remarks that India can achieve GDP
expansion of 8-9 per cent a year despite the global slowdown.

Industrialists have been asking banks to cut prime
lending rates to single digit to propel demand and provide
cheap credit to businesses. Prime lending rates stand in the
range of 12.75-13.25 per cent.

Mukherjee also said India faces many challenges on the
economic front. "The present Government is committed to the
overall development of the economy. For the economy to
prosper, the business has to flourish. Our role is to provide
an enabling environment for the business to flourish by way of
various pro-growth policy announcements," he said.

Though India beat market expectations to post 6.7 per
cent economic growth last fiscal, manufacturing growth
remained a concern as it saw negative growth in the fourth
quarter of the last fiscal.

To enable the industry access credit after sources of
funds dried up post-Lehman Brothers collapse in mid-September,
2009, RBI has been easing money supply in the economy.

The central bank has so far cut short-term lending rate
(repo) by 4.25 percentage points, short-term borrowing rate
(reverse repo) by 2.75 percentage points and mandatory
deposit requirements for banks. However, cut in key rates by
RBI is not getting reflected in lending rates reduction by
banks. PTI MG
RAI
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