Chidambaram to public sector banks: Ensure credit flows to home, consumer durable sectorsFebruary 12th, 2008 - 8:02 pm ICT by admin
New Delhi, Feb.12 (ANI): Union Finance Minister Palaniappan Chidambaram has asked state-run banks to ensure that productive sectors of the economy are not starved of credit and to ensure credit flow to the home and consumer durables sectors, which have witnessed some slowdown in recent months.
Chidambaram, who met the chiefs of state-run banks on Tuesday, spoke about credit quality and credit delivery.
The Reserve Bank of India (RBI) has raised interest rates nine times since October 2004 to make loans more expensive.
“Consciously over a period of a year there has been a slowing down of credit growth. But the banks ensured that that slowing down did not affect the productive sector. I have made this clear in the past that the productive sector should not be starved of credit. I think they have kept that principle in mind, productive sectors have not been starved of credit,” he said.
“Banks have been advised to pay attention to the requirements of credit for home owners and requirement of credit for those who would like to buy consumer durables and consumer non-durables. The reason is that consumer drives production and production drives investment. Therefore, one must ensure that there is adequate growth in consumption also,” he added.
Some of the banks, including State Bank of India, the Canara Bank, the Housing Development and Finance Corporation and the Allahabad Bank have already reduced lending rates.
Earlier, a credit squeeze and high interest rates had forced consumers to forego durables and also slowed down housing sector purchases, which are key drivers of economic growth.
The impact has already been felt, since the government recently forecast that the economy would grow at 8.7% this financial year as opposed to last year’s growth of nine per cent. (ANI)
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