Finance Minister P Chidambaram has assured industry that the government will ask state-owned banks to cut interest rates.
Chidambaram today met the heads of the three leading industry bodies, the Federation of Indian Chambers of Commerce and Industry (Ficci), the Associated Chambers of Commerce and Industry of India (Assocham) and the Confederation of Indian Industry (CII), to discuss the problems industry was facing.
“The finance minister has assured us that the government will persuade the PSU banks to reduce interest rates,” Assocham President Sajjan Jindal told reporters after the meeting.
The government and the Reserve Bank of India (RBI) have taken a number of steps since last month to insulate the Indian banking system from the global financial turmoil.
CII President KV Kamath said the government assured industry that it would continue to monitor liquidity as well as infuse more liquidity as and when required.
“We will review interest rates after watching the impact of the RBI decision on liquidity,” he said.
On Saturday, the RBI cut its repo rate by 50 basis points to 7.5 per cent and the banks’ cash reserve ratio (CRR) requirement by 100 basis points to 5.5 per cent. It also slashed banks’ SLR by 1 per cent.
Ficci President Rajeev Chandrasekhar said the government was in agreement with industry’s view that restoring liquidity was not enough and that the risk-averse behaviour of banks would have to be changed. He added the behaviour was based on the fact that they were not able to project a growth trajectory that would ensure that their loans would be repaid.
Reigniting the growth process and thereby increasing the level of investor confidence could change this, he said.
“Get the focus back on growth and growth alone,” said Chandrasekhar.
