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Interest rates to remain stable, says FM

Written by: Staff
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New Delhi, Mar 31 (UNI) Finance Minister P Chidambaram today said the interest regime would remain ''attractive'' both for the borrowers and depositors, conveying thereby that the forthcoming Credit Policy Review of the Reserve Bank of India would strike a balance between the credit and deposit rates.

''The interest rates will remain attractive for the borrowers and depositors,'' the Finance Minister told reporters on the sidelines of a function on the occasion of the opening of 2000th CBS (Centralised Banking Solution) branch of the Punjab National Bank Earlier in his address, the Finance Minister said striking a good balance between the two interests would always remain a challenge for the banks.

The Finance Minister indicated the interest regime would remain stable after he was asked whether the soft interest rate regime was over.

Mr Chidambaram said he was confident the central bank would address the issue of supply of credit in the ensuing credit policy.

He said the first step of increasing the liquidity in the system has already been taken in the form of raising the interest rates on the NRI deposits.

It was on the instructions of the Finance Minister that a Committee of the Indian Banks Association had met RBI Governor Y V Reddy seeking measures to remove the credit-deposit growth mismatch.

While the deposits have been growing by 16 per cent, the growth in credit has been 25 per cent.

The Finance Minister emphasised that the banks must not starve the industry or any other segment of the economy - be it farmer, student or self-help groups - of the kind of credit needed for sustaining the GDP growth of over eight per cent. ''The virtuous circle of increased saving-investment-growth should not be broken,'' he said.

UNI PC SS BD1550

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