New Delhi: Convinced that rural areas and labour intensive sectors hold the trigger button on demand, the government today asked banks to step up lending to small and medium industries and infrastructure to stimulate the economy.
“In view of contracting global demand, we have to focus on domestic demand by primarily stimulating demand in the rural areas and highly labour intensive sectors,” External Affairs Minister Pranab Mukherjee, who is holding charge of the finance portfolio, told reporters after meeting heads of PSU banks here.
On their part, bankers said they would cut lending rates to fuel consumption.
“We must support the development of those section which immediately boost growth and throw up employment opportunities,” Mukherjee said.
Last week in its quarterly review of monetary policy, RBI held policy rates steady while, saying its measures since October gave banks enough scope to cut rates further.
Finance Secretary Arun Ramanathan said as “deposit rates have moderated, there is general expectation that interest rates will come down.”
The sectors that specifically caught enhancement of bank credit during the meeting were infrastructure, rural credit, consumer credit and MSME, among others.
Speaking immediately after the meeting, several bankers including the country’s largest lender SBI said that they are considering a cut in lending rates.
Canara Bank Chairman and Managing Director A C Mahajan said interest rates will go down in all the segments of the loan portfolio. The bank would take a decision on rates within this month, he added.