Chidambaram Asks Indian Banks to Boost Home Consumer Loans
Chidambaram Asks Indian Banks to Boost Home, Consumer Loans
By Kartik Goyal
Feb. 12 (Bloomberg) — India;s Finance Minister Palaniappan
Chidambaram asked state-run banks to boost loans for the
purchase of homes and consumer goods, which he said were key to
economic growth.
“There is a feeling that adequate credit is not being
provided to the housing sector and the consumer durables
sector,;; Chidambaram said in New Delhi today after meeting
chiefs of state-run banks. “Banks have been asked to pay
attention to provide adequate credit to these two sectors as
they are drivers of the economy.;;
Loan growth has eased in past months as consumers bought
fewer automobiles and washing machines because of high interest
rates and delayed home purchases as prices rose. Lending grew
22.6 percent in the 12 months through Jan. 25, less than the
29.8 expansion percent a year earlier, Bloomberg data shows.
The central bank has raised rates nine times since October
2004 to make loans more expensive.
Calling on banks to improve the delivery of credit, the
finance minister said the lenders would have to decide on
interest rates. Chidambaram said the state-run banks are likely
to meet their fiscal-year targets.
Some banks have already reduced interest rates. State Bank
of India, the nation;s biggest by assets, yesterday cut its
benchmark prime lending rate by 25 basis points to 12.5 percent.
A basis point is 0.01 percentage point.
Housing Development Finance Corp., the Indian mortgage
lender partly owned by Citigroup Inc., and banks such as Canara
Bank and Allahabad Bank have also cut rates. Chidambaram had
last month asked banks to lower rates to revive slowing loan
growth and increase investment in Asia;s third-biggest economy.
Holding Rates
Governor Reddy refrained from reducing rates in the Reserve
Bank;s last monetary policy on Jan. 29 on concern rising oil and
food prices will stoke inflation. Wholesale prices, which rose
4.11 percent in the last week of January, don;t reflect last
year;s 57 percent increase in crude oil costs as retail fuel
prices haven;t been increased since June 2006.
Higher borrowing costs are prompting consumers to forego
purchases. Bajaj Auto Ltd., India;s second-largest motorcycle
maker, posted a 16 percent drop in sales in January, its 12th
straight month of declines.
The government on Feb. 7 said India;s economy may expand
8.7 percent in the 12 months to March 31, the weakest pace in
three years. Growth was 9.6 percent in the last financial year.
To contact the reporter on this story:
Kartik Goyal in New Delhi at
