Interest rates to moderate; Banks in good health: FM

New Delhi, July 21 (UNI) Finance Minister P Chidamabaram today painted a robust picture of the Banking sector and said that he expects the interest rates to moderate, as room for inflationary expectations recedes with the inflation rate gradually coming down.

"Interest rates have been rising. But the inflation data put out this morning shows that the inflation rate has declined form 4.96 per cent to 4.68 per cent. This is a tolerable rate of inflation. This should dampen the inflationary expectations. If inflation rate declines then inflationary expectations should dampen and interest rates should moderate", Mr Chidambaram told a newsconference after a periodic meeting with Chiefs of State-run Banks.

"If inflation remains moderate, interest rates will moderate", Mr Chidambaram quipped.

The Finance Minister said a certain amount of inflation was inevitable in a situation where the economy is growing at around eight per cent.

But, he gave a categorical assurance that inflation would be kept under control both by the deployment of monetary policy by the Reserve Bank of India and fiscal and other measures by the government.

The Annual inflation rate stood at 4.68 per cent on July 8, compared with 4.96 per cent a week earlier.

The Finance Minister said his expectation was that the economy will maintain its growth momentum and said the target of the government was that it should continue to grow at least at eight per cent per annum.

Mr Chidambaram extensively quoted figures to show that the Banking sector was in good health. There has been a dramtic fall in terms of the Gross and Net NPAs of the Banking sector, healthy growth of deposits and advances, the industry was way above the nine per cent statutory requirement of CRAR, loans to the agricultural sector had far exceeded the target, the Self Help Groups were doing a stupendous job in terms of lending and that credit growth was encouraging.

He also explained as to why consolidation in the Banking industry was the need of the hour, but operationalisation of the concept had to be done jointly by the managements and unions.

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