New Delhi: Finance Minister P Chidambaram is likely to review the recent hikes in interest rates at a meeting with heads of the public sector banks on 13 August, besides taking a report card on the Rs71,680 crore debt waiver scheme.
Chidambaram would be meeting the bankers for the first time after the quarterly review of monetary policy by Reserve Bank on 29 July. The apex bank raised the key policy rate to 9% following which most of the PSU banks hiked their lending rates by 50-100 basis points.
Although the Finance Ministry has intimated about the date, the agenda is not yet known, said a senior bank official.
It is expected that the Finance Minister would review the implementation of debt waiver scheme and interest rate scenario, he said.
FM may even ask the bank increase credit exposure to productive sectors and cut down credit growth to unproductive segment.
The official also indicated that the banks could be asked to keep interest rate as low as possible for key areas like housing and education loan.
Margins of banks are already under pressure due to successive hike in the mandatory cash reserve and repo rate (short-term lending rate) by the Reserve Bank to contain inflation.
Throughout the current fiscal, the central bank has been following a stringent monetary policy, which saw repo rate surging by 1.25% and CRR by 1.5%.
Rate hike in quick succession resulted in increase in cost of fund for the banks. Subsequently, many banks raised benchmark prime lending rate to the level of 14%.
In addition, the meeting would also deliberate on the next three quarter performance of the banking sector, the official added.
Meeting with the heads of banks would also take stock of fresh lending to the beneficiaries of debt waiver scheme.
The waiver scheme which ended on 30 June, according to estimate, have benefited about four crore small and marginal and other large farmers.