Briefing reporters, following a meeting with chief executives of public sector banks, he said, banks have been told to provide more housing loans and loans for consumer durables and non-durables. This will spur demand, which in turn will push forward investment.

Credit flow

Admitting that there has been slowing down of credit growth, Mr Chidambaram said “this slowing down of credit has indeed, to some extent, affected flow of credit in housing sector and consumer durables sector.”
However, slowdown in credit growth had not affected flow of advances to productive sectors of the economy. Banks are adequately meeting the credit requirements of the productive sector of the economy, he said. But, he pointed out, “there is feeling that credit to the housing and consumer goods sector has fallen down. These issues figured during the discussion with bankers.”  “Banks have been advised to pay attention to requirement of credit for home seekers and to those who would like to buy consumer durables and consumer non-durables,” he added observing some banks have already begun moving in that direction.

Mr Chidambaram expressed the hope that banks would pay attention to credit delivery as well as credit quality to these sectors over the next few days. Some public sector banks like SBI, Canara Bank, PNB Housing Finance and Bank of India have already announced a cut in lending rates.

He said “there is no demand for reduction in interest rate on education loans. Bight boys and girls will do well and will be able to pay off the loans.”

Canara Bank Chairman & Managing Director M B N Rao observed that with ample liquidity in the banking system, pressure on rates have eased.

With the revision of benchmark Primary Lending Rate (PLR), the interest rates for home and car loans, besides loans for small and medium sector and consumer goods would come down.