FM Sensitises Banks For Cheaper Home Loans

A day after public sector banks led by State Bank of India cut interest rates; Finance Minister P Chidambaram raised hopes of another round of cuts. It is known that in last month bankers waited before acting on Chidambaram’s suggestion. This time they appeared more cooperative, saying there was scope for fresh cuts. During a pre-budget meeting with state bank chiefs on Tuesday, the Finance Minister marked housing and consumer goods sectors as part of his overall thrust to ensure adequate credit flow. The two sectors have been hit due to the credit squeeze enforced by Reserve Bank of India over the last 12 months to ensure that inflation stays within limits.
Mr. Chidambaram told reporters after the meeting where he also reviewed the performance of public sector banks during the first three quarters, “Consciously, over a period of a year, there has been a slowing down of credit growth. However, this slowing down of credit has indeed, to some extent, affected flow of credit to the housing sector and consumer durables sector,” He said that the banks have been advised to pay attention to the requirements of credit in these sectors.
While explaining that the government does not give directions to banks, the minister said that the Centre was only trying to sensitize banks to the demands of the consuming public and the prevailing situation. Further he added, “Banks should respond to the situation”.