In a meeting that had been lent much significance ever since Union Finance Minister Pranab Mukherjee said he would meet heads of public sector banks and ask them to look at a more ‘benign’ lending regime that would favour both individual loan seekers as well as corporates, it was announced that the FM had indeed carried out his promise.
With the meeting happening today, the FM has officially impressed upon banks that they should make the accessing of loans less costly as well as make the process less cumbersome.
The straight talk from the FM has prodded the State Bank Of India's CEO, O.P. Bhat to say, “Something may be decided by the end of the month.”
If rates are lowered, then individual loan-seekers can look forward to cheaper home, auto, and other retail loans. Those from the corporate world, looking to expand their business too will be benefited.
The reason for the FM batting for cheaper loans for all is to encourage people to spend on goods, services and products in an effort to pump up demand and thereby counter the global financial crisis-induced slowdown, which has almost ground businesses to a halt. It is seen by the government as the best tool to service the needs of the individuals, corporates as well as the economy.
The FM had expressed worries on money being priced at unreasonable levels, precluding any chance of people opting to seek loans for any purpose. He said, “This has become a huge area of concern.”
He indicated that banks have not lowered rates even though the Reserve Bank of India had lowered key rates leaving banks awash in liquidity which they were not willing to lend at reasonable rates. RBI slashed its repo rate by 4,25 percentage points and the reverse repo rate by 2.75 per cent in recent times in an effort to get banks to loosen their purse strings, but to no effect.
Putting across his urgency in clear and unambiguous terms, the FM asked banks to, “Address these concerns expeditiously because economic growth was dependent on it.”
However, the FM refused to speculate about the nature of the cut in interest rates.
Banks have kept their prime lending rates (PLR) in double digits, while industrialists’ lobbies have been asking for the level to be pegged in single digits. Consumers have voted with their feet too by shunning big-ticket shopping like homes and cars to indicate their concerns. PLR is pegged at a between 12.75-to-13.25 per cent.
Govt Agenda Growth-Bound: Pranab