“I would like - I can't wish this - that banks cut lending and deposit rates by 50 basis points so that it stimulates investment and consumption,” he said on the margins of a meeting with Chief Executives of commercial banks here. If monetary policy was supportive, interest rates could be lowered, he added. “Investment and consumption are the drivers of growth, and we have asked banks to ensure that credit is not denied to the two sectors,” the finance minister said, even as credit off-take from consumers appeared to have slowed down this fiscal (2007-08).

“I have asked banks to increase lending to investors and consumers of consumer durable, non-consumer durable as there is sluggishness in these two sectors,” Mr Chidambaram added. His comments come ahead of the quarterly review of India's monetary and credit policy for the current fiscal, which Reserve Bank of India (RBI), the central bank, is expected to conduct towards the end of this month.

Stable interest rates

Chief Executives of banks, who participated at Friday's meeting at the Vigyan Bhavan conference complex here, said they foresaw interest rates in the country remaining stable during the year. “With inflation at a five-year low, falling interest rates globally, and surplus liquidity with banks, the interest rates can come down by 0.25-0.50 percent this quarter,” said M B N Rao, chairman of the Indian Banks Association.

Mr Rao also is the Chief Executive of Canara Bank, said Top Executives of his bank would meet shortly to take a view on this matter, while others said they would wait for the central bank to review the monetary policy. “At least till April the rates look stable,”  O P Bhatt, Chairman of the State Bank of India (SBI) said.