Finance Minister P Chidambaram is expected to take stock of the recent hikes in interest rates at a meeting with heads of the public sector banks tomorrow, a day after official data showed industrial growth slowing down in the first quarter due to rising costs of borrowing.
Chidambaram would be meeting the bankers for the first time after the quarterly review of monetary policy by Reserve Bank on July 29.
The apex bank raised the key policy rate to 9 per cent following which most of the PSU banks including the largest lender SBI hiked their lending rates by 50-100 basis points.
The meeting is coming a day after official data showed that industrial growth nearly halved to 5.2 per cent in the first quarter this fiscal from 10.3 per cent a year ago.
Economists attributed the slowdown to poor performance of the manufacturing sector due to rising interest rates.
They projected the economy to grow at sub-eight per cent this fiscal from 9.1 per cent last year.
It is expected that the Finance Minister would also review the implementation of debt waiver scheme and interest rate scenario, sources said.
Chidambaram may even ask the bank to increase credit exposure to productive sectors and cut down credit growth to unproductive segment.
The sources also said that banks could be asked to keep interest rate as low as possible for key areas like housing, up to certain category, and education loan.
Margins of banks are already under pressure due to successive hikes in the mandatory cash reserve and repo rate (short-term lending rate) by the RBI to contain inflation.
Throughout the current fiscal, the central bank has been following a stringent monetary policy, which saw repo rate surging by 1.25 per cent and CRR by 1.5 per cent.
