Interest rates to stay soft: FM

FM said the banks were merely seizing an opportunity for profit.

Finance Minister P Chidambaram has assured that there would not be a general rise in home loan interest rates.

Reacting to yesterday's hike in housing loan rates by ICICI Bank and HDFC, the FM said the banks were merely 'seizing an opportunity for profit' and the rates would remain favorable in the medium term, indicating that public sector banks would not raise interest rates.

In an interview on Zee News here today, Chidambaram, said the delay in monsoons in Maharashtra and central India were causing concern, but it was too early to panic. CMIE had "jumped the gun" in reducing its economic growth forecast due to apprehension of a poor monsoon.

He also added that public issues were planned for unlisted banks and that the insurance bill was unlikely to be introduced in the monsoon session of Parliament.

Laying emphasis on pension reforms, he said, "We are at the beginning of a curve which could become a crisis." He said this initiative would involve allowing foreign companies in the sector as fund managers.

Insurance sector reforms, however were on the slow track once again and the Insurance Bill would not be introduced in Parliament in the monsoon session.

"The committee has asked for more time to come up with legislative proposals," Chidambaram said.

On the issue of savings withdrawals becoming fully taxable, he said withdrawals on savings made till the date of the switchover would remain tax-free. "Nobody's current savings would be affected. Whatever model is adopted would only be prospective," he added.

The Finance Ministry had decided not to go ahead with MoU with public sector banks as it was against the spirit of corporate governance.

Since the government was not a 100 per cent owner of the banks anymore, the MoUs on goal setting would not be signed. Instead, the ministry would only ask for a 'statement of intention' from the banks.

Reiterating the commitment of the UPA government not to let government holding in public sector banks go below 51 per cent, he said the four remaining banks fully owned by the government "" Central Bank, Punjab & Sind Bank, United Bank and Indian Bank "" would also eventually be listed on the bourses.