FM asks PSBs to relax credit to housing sector

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New Delhi, Feb 12: Finance Minister P Chidambaram in a meeting here today with Chairpersons of Public Sector Banks (PSBs) asked them to relax credit to the housing sector and consumer durables and consumer non-durable sectors.

"I have asked them to ensure adequate credit flow to house owners seeking loans and for purposes of purchase of consumer durables and non-durables," Mr Chidambaram told newspersons. The Finance Minister met the CEOs of PSBs to seek their suggestions on the Budget 2006-09. While this was the main item on the agenda, other isues relating to the performance of the banking industry were also taken up.

Mr Chidambaram said while there had been no problem in meeting the credit needs of the productive sectors, the Banks had adopted a cautious approach on credit flow to the housing sector and for purchase of car loans and other such items.

He agreed to a suggestion that non-food credit had come down from the last years level and the one before that but added that a further squeeze could adversely affect consumption, production and investment in these sectors.

Mr Chidambaram said it was in this regard that he made out a case for extending credit more liberally to these sectors.

The Finance said he had made no suggestions to the bankers to bring down interest rates as the matter was entirely in the domain of the managements of the Banks.

Despite the fact that the RBI in its recent review of the credit policy had left the Prime Lending Rate (PLR). repo rate and reverse repo rate unchanged, a number of PSBs, including the State Bank of India, have brought down their interest rates.

The main reason for this is the high growth of deposits as compared to credit, which has necessitated a cut in the lending rates.

Asked to comment on industrial growth slipping to 7.6 per cent in December from 13.5 per cent in the corresponding month of last year due to squeeze in credit, Mr Chidambaram said he did not have an opportunity to look closely at IIP figures nor was that the mandate of the meeting. The Finance Minister said the emphasis on credit quality will continue.

Mr Chidambaram said the progress relating to advances, deposits, net interest margins and net profits was satisfactory. He said the targets for this fiscal relating to these parametres would be met.

Asked to comment on the package to the sugar industry, Mr Chidambaram said some banks, like Punjab National Bank, Indian Overseas Bank and Indian Bank had started its started implementation in right earnest. He said in the next ten days, all applications received by various Banks will be looked into.

He said as the Finance Minister his endeavour was to sensitise the Banks to certain issues. Earlier, he had stressed the need for ensuring credit quality to all sectors and credit delivery to produtive sectors. Today, he had spoken to the Banks about credit delivery to the housing sector.

To a question relating to lowering of interest on education loans, Mr Chidambaram said the demand was not for lowerng interest rates for purposes of education, but for providing adequate qunatum of these loans. He said PSBs have aready lent a total of Rs 17,000 crores in this regard and by March the target for the education loan sector will be met.


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