New Delhi: India’s finance ministry is talking to banks to boost lending and the situation is expected to improve soon, a top government official said on Tuesday.
Several Indian banks have been reluctant to ease their lending rates, despite sharp cuts in policy rates by the central bank, on apprehension of an increase in bad loans on their books in a slowing economy.
“That is something the ministry of finance is talking to the banks. I am very sure that the atmosphere will improve over a little bit of time,” Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, which charts out growth plans said.
He was responding to questions on why banks were hesitating to lend.
“These things do take some time,” Montek said on the sidelines of a conference on rural education.
India’s central bank slashed its main interest rates by 1 percentage point in early January, its fourth cut in four months as it moved to protect growth in Asia’s third-largest economy.
After growing at or above 9% for the past three fiscal years, India’s economy has moderated due to high borrowing costs and the global financial crisis.
Indian policy makers now say the economy is likely to slow to 7% in the year to March 2009.