FM to meet bankers soon on need to lower rates

By: admin
Updated: 03 Oct 2013 08:31 AM

New Delhi: Finance Minister P
Chidambaram will soon meet heads of public sector banks to impress upon
them the need to lower interest rates in select sectors, including auto,
to boost demand and promote sagging growth.

"Lower interest rates will depend on the lending capacity of banks. Banks
to decide on sectors where lower rates will boost demand. I will meet
bankers soon," Chidambaram said.

The government has decided in principle to enhance capital infusion into
PSU banks over and above what was provided in the budget to enable them to
extend additional credit to the auto and consumer durables sectors.

The decision to increase the quantum of capital infusion from Rs 14,000
crore provided in the budget was taken today at a meeting here between
Chidambaram, RBI Governor Raghuram Rajan and Economic Affairs Secretary
Arvind Mayaram.

"This amount will be enhanced sufficiently. The additional amount of
capital will be provided to banks to enable them to lend to borrowers in
selected sectors such as two-wheelers and consumer durables at lower rates
in order to stimulate demand," a Finance Ministry statement said.

"While this will bring relief to consumers, especially the middle class,
it is also expected to give a boost to capacity addition, employment and
production," it added.

Output of the consumer durables sector declined 9.3 per cent in July
compared with growth of 0.8 per cent in the same month last year, the
Ministry of Statistics and Programme Implementation said on September 12.
The segment saw a 12 per cent decline in output in April-July compared
with growth of 6.1 per cent a year earlier.

Production of consumer durables reflects demand for products such as TVs,
fridges and washing machines.

Two-wheeler sales recorded 0.72 per cent growth in the April-August period
as against 6.8 per cent a year earlier.