Finance Minister P Chidambaram today asked public sector banks not to increase interest rates for home loans upto Rs 30 lakh and lend more to consumers even as the Reserve Bank of India is trying to moderate credit growth to contain inflation.
“(Responding to monetary policy) Public sector banks have increased their benchmark prime lending rates by 75-100 basis points. Banks have said almost unanimously that it will not impact existing home loans up to Rs 30 lakh, auto loans and education loans,” Chidambaram told reporters after meeting the chiefs of public sector banks here.
Sources said banks were advised by the minister not to raise interest rates for new home loans upto Rs 30 lakh also.
Chidambaram also impressed upon banks to increase auto loans as well as personal loans by keeping interest rates affordable, sources added.
Taking cues from North Block, most banks have already left interest rates untouched in the above categories.
Some banks like Punjab National Bank, which have raised interest rates for existing borrowers in these categories, have assured that they will take a relook in these portfolios.
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Taking a feedback from banks, Chidamabram said credit growth will be brisk this year. He said advances are likely to grow by over 20 per cent while deposits over 17 per cent.
The RBI has pegged credit growth at 20 per cent and deposit growth at 17 per cent for the banking sector in 2008-09.
“Deposits are growing at a satisfactory rate compared to last year..Advances are higher compared to last year (in the first quarter),” Chidambaram said.
Most banks have conveyed that that they are not witnessing any slowdown in credit demand.
However, there was no growth in farm credit due to the farm debt waiver and relief scheme, which saw over Rs 66,000 crore written off from the accounts of banks.
Chidambaram asked the banks to extend fresh loans to farmers including the farmers, whose loans were waived and take steps to increase disbursements in the month August and September after delayed arrival of monsoon in many parts of the country.