'No overheating of economy; no interest hike'

New Delhi, Nov 2: In the backdrop of the economy poised to grow by eight per cent in 2006-07, Finance Minister P Chidambaram today denied that it was overheated and said the government was not planning to raise administered interest rates on government's savings schemes.

Mr Chidambaram told reporters here today that the decision of the RBI to raise repo rate by 25 bps in its recently announced Mid Term Review of the Annual Credit Policy was aimed at moderting credit growth in specific sectors.

RBI Governor Y V Reddy has spoken in a similar vein, denying that there was overheating of the economy.

"I don't believe there is overheating. It is a well intended caution that there could be such signs in some sectors", Mr Chidambaram said.

He said the repo rate increase was aimed at reining in frenzied bank lending without damaging broader growth.

Mr Chidambaram said the hike was intended at moderating credit growth in some sectors, re-balancing bank's credit portolios and exercising prudence.

The Finance Minister said the government does not propose to raise the interest on government administered saving schemes in response to the repo rate hike.

Repo rate is the rate at which the Central Bank lends to commercial banks, but due to a hefty growth in the deposit portfolio of commercial banks, the lending to these banks from RBI of late has been low.

Analysts say this would have no immediate impact of interest rates, especially in view of the fact that RBI has left other policy rates unchanged, including the bank rate.

UNI