Chidambaram urges banks to offer reduced interest rate loans

In a pre-Budget meeting with public sector bank chiefs, Indian Finance Minister, P Chidambaram has urged the public sector banks to lend more to housing and consumer durables borrowers. The FM said that the banks should offer loans at affordable interest rates to thwart a negative impact on the economy due to a slowdown in the credit growth. 

Some banks like State Bank of India has already reduced its benchmark rate, the other banks are expected to cut rates by February 20. 

It is expected that banks are likely to lower interest rates for both deposit and lending by 25-50 basis points. Prime lending rates are in the range of 12 to 14 per cent in India. 

According to media reports, housing loan growth has declined to 20 per cent in April-November 2007 from 35 per cent in the same period in 2006.

Loans for consumer durables have declined by 4.4 per cent in the period compared with a growth of 11.2 per cent in the same period, the previous year. 

Bank credit growth between April 2007 and January 2008 was 12. 3 per cent as against 17.4 per cent a year ago.