The Hindu Business Line : Chidambaram for cut in rates to spur demand

New Delhi, Oct. 5 The Finance Minister, Mr P. Chidambaram, has urged the chiefs of top banking institutions to consider steps to reduce borrowing costs (cut lending rates) so as to give a boost to production of automobile and paper products in the country and also help spur demand in these sectors.

The automobile sector sees firm interest rates on account of the Government’s anti-inflationary measures as an important reason for slowdown in demand for cars and motorcycles.

However, many bankers who attended today’s meeting convened by the Finance Minister to discuss the problems faced by these two sectors, noted that decrease in interest rates would largely depend on the monetary policy cues expected this month end from the RBI. “One has to be able to withstand the cut in interest rates. There are also depositors’ interests that have to be factored in. Any decrease in interest rates depends on the monetary policy”, Mr K.V.Kamath, Managing Director and CEO of ICICI Bank, told reporters here after the meet.

The Bank of India Chairman and Managing Director, Mr T.S. Narayanasami, said that the bank would not mind being more cost effective so as to support the slowdown ridden sectors. The PNB Chairman, Dr K.C.Chakrabarty, indicated that the bank may not be in a position to cut interest rates further.

Maruti Suzuki India’s Managing Director, Mr Jagdish Khattar, said that the Finance Minister had asked bankers to take a re-look at interest rates to stimulate demand. Top executives of Tata Motors and Mahindra & Mahindra also attended the meeting. Car sales growth in April-August this fiscal slowed to 13.6 per cent compared with 20.6 per cent in the same period last year, according to the Society of Indian Automobile Manufacturers.

Meanwhile, the BILT Chairman, Mr Gautam Thapar, said that the paper manufacturers have also sought a reduction in interest rates. He said that demand for paper products was strong, but added that any negative sentiment would have a spiraling impact. “We might see reduction in demand next fiscal”, he said.