Government talking to banks on cutting lending ratesDecember 18th, 2008 - 10:04 pm ICT by IANS
New Delhi, Dec 18 (IANS) The government is talking to banks to bring down floating interest rates for loans, apart from working out bailout packages for several sectors, Home Minister P. Chidambaram said in Parliament Thursday.The central bank has slashed the cash reserve ratio (CRR), prime lending rate (PLR) and the statutory liquidity ratio (SLR) in recent times, and the government feels the benefits of these cuts should be passed on to borrowers.
“We are talking to the bankers, as the PLR is down. Past borrowers who are on floating interest rates on their loans should benefit,” the minister said.
Chidambaram, the immediate-past finance minister, also confirmed that the government is currently working on bailout packages for the automobile, textile, gems and jewellery and steel sectors.
“These industries are facing a slowdown and bailout packages are being devised,” he said
Chidambaram said the current liquidity crunch could be addressed through a two-staged exercise.
“Liquidity is the first stage, we’ve addressed the issue through CRR, SLR cuts and infused adequate liquidity in the system but liquidity is not enough. This is a two-stage exercise, the liquidity must be transferred to actual credit, which should be available at a reasonable price,” he said.
Emphasising the need for credit, Chidambaram said: “Credit cannot be denied to our farmers or our labourers or our workers or our service providers who have provided this extraordinary growth for four years of UPA government.”
He described India as a mature democracy and economy, and said: “We must try to minimize the pain on the poorer and the less well of sections, and the country must go through this period of adjustment until the world economy recovers and we get back to the 9 percent (growth) mark.”
Chidambarm said there are some structural demand shortages that cannot be resolved immediately, and cited the international fall in demand for steel.
He compared the India growth story in the first four years of the United Progressive Alliance (UPA) government with that of the previous National Democratic Alliance (NDA) government.
“The average growth rate of the country in the first four years of NDA rule was 5.3 percent while the same figure for UPA’s first four years is an average of 8.4 percent.”
Chidambaram also accused the NDA of not doing enough to bring down fiscal deficit.
“The NDA regime inherited a fiscal deficit of 4.8 percent, which went up to 5.9 percent before coming down to 4.5 percent in the last year of NDA rule, we inherited 4.5 percent and it went down to 2.7 percent in 2007-08,” he said.
The home minster said the government has taken rapid decisions in the past few months in order to tackle the economic crisis and stimulate domestic demand.
He reiterated that India will maintain a growth rate of more than 7 percent, saying it will be the second largest in the world amongst “big economies”.