FM to ask banks to consider slashing interest rates

FM to ask banks to consider slashing interest rates


Karaikudi: Terming the Reserve Bank’s latest policy package to inject more liquidity into the system as the “right signal", Finance Minister P Chidambaram today said he will ask PSU banks to consider lowering lending rates.

In an exclusive interview to PTI, the Minister said he would take the issue of interest rate cut “forward" during a meeting with chairpersons of public sector banks in Delhi on 4 November.

“I am happy with the policy package announced by the RBI. When it announced its (peak season) policy on 24 October, the RBI had promised swift action in case it is necessary to infuse more liquidity.

“I am happy that the the RBI has responded swiftly," he said in his reaction to yesterday’s policy package announced by the central bank.

In a slew of announcements, the RBI had yesterday cut the repo rate (the rate at which it lends to banks and is a signal to banks to reduce their rates) by 50 basis points to 7.5%, cash reserve ratio by 100 basis points to 5.5% and the statutory liquidity ratio by 100 basis points to infuse an additional Rs85,000 crore into the system.

The central bank had already injected in October additional liquidity of Rs1,85,000 crore in the wake of global financial crisis and depression in the US that had spread fears in India of a recession and brought in volatility in the stock markets.

Chidambaram said the RBI’s policy was also a signal to the banks that they should now now consider lowering their interest rates.