Interest rates will moderate, says Chidambaram

August 1st, 2008 - 7:03 pm ICT by IANS  

A file-photo of P. Chidambaram

Bangalore, Aug 1 (IANS) Interest rates will moderate and go back to normal in about six months to a year, finance minister P. Chidambaram said here Friday. “Interest rates will not remain high for ever. We will get out of the trough. They (interest rates) will moderate and go back to normal rates, hopefully in about six months to a year,” Chidambaram said at a function organised by the state-run Corporation Bank here.

Admitting that there was pressure on banks to raise interest rates to protect their bottomline, Chidambaram advised banks to explore ways to mitigate the burden of high interest rate on borrowers by reducing the cost of money.

“Banks have an opportunity to mitigate the burden of high interest rate by reducing the cost of money so that they are not obliged to raise interest rate every time the monetary policy is tweaked,” he said.

“There are ways in which banks can take care of the bottomline even while mitigating the burden of high interest rate upon borrowers. The banks must explore those ways.”

According to him, one way to do this was to mobilise low-cost deposits and increase business by employing business correspondents, branchless banking and reaching out to the needy through innovative models.

“Instead of employing and appointing a branch manager, banks can appoint a business correspondent without employing one. A business correspondent is a barefoot banker and a low-cost branch manager, who can bring new business by mobilising deposits and create opportunities to advance money,” Chidambaram said.

Earlier, Chidambaram digitally inaugurated two more branches of the Karnataka-based Corporation Bank, taking the tally to 1001.

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