Finance Minister P Chidambaram has assured industry that the government would ask state owned banks to cut interest rates.
Chidambaram met the heads of the three industry bodies - Federation of Indian Chambers of Commerce and Industry (FICCI), Associated Chambers of Commerce and Industry of India (Assocham) and Confederation of Indian Industry (CII) today to discuss the problems they are facing.
"The finance minister has assured us that the government will persuade the PSU banks to reduce interest rates," Sajjan Jindal, president, Assocham 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 has assured industry, that it would continue to monitor liquidity and infuse more 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 banks' cash reserve ratio (CRR) 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 is in agreement with the industry’s point of view that restoring liquidity is not enough and that the risk averse behaviour of the banks would have to be changed.
He added that the risk averse behaviour of the banks is based on the fact that they are not able to project a growth trajectory that will ensure that their investments, loans would be repaid. Reigniting the growth process and thereby increasing the level of investor confidence could change this, hefelt.
“Get the focus back on growth and growth alone”, Chandrasekhar added.
