OTHER GROUP COMPANIES
market

Cheap loan plans to have adverse impact: RBI

It is not wise to increase consumption by lowering interest rates. If the rate goes up it will become an NPA, RBI says

October 07, 2013 11:13 IST | India Infoline News Service
The Reserve Bank of India (RBI) said that lower interest rates for auto and consumer loans can have an adverse impact on their asset quality as no one can force banks to selectively cut rates.

According to RBI Deputy Governor KC Chakrabarty, we cant attract people to buy goods by lowering interest rates.

If interest rate goes up, then people will suffer. It is not wise to increase consumption by lowering interest rates. If the rate goes up it will become a non-performing asset (NPA), Chakrabarty told reporters on the sidelines of a conference on Saturday.

On 3 October, the finance ministry had asked public sector banks to cut interest rates to increase demand for vehicle and consumer durable loans in the festival season.

The finance ministry said that the government will provide additional amount of capital to state-run banks (PSU banks) to enable them to lend to borrowers in selected sectors such as two wheelers, consumer durables etc, at lower rates in order to stimulate demand.

While this will bring relief to the consumers, especially the middle class, it is also expected to give a boost to capacity addition, employment and production, the finance ministry said in a statement.

This decision is based on the discussions between Dr Raghuram Rajan, Governor, RBI and the Union Finance Minister, P Chidambaram.

OPEN A DEMAT ACCOUNT & Get
FREE Benefits Worth 5,000

FEATURED ARTICLE

BLOGS

Open Demat Account

  • 0

    Per Order for ETF & Mutual Funds Brokerage

  • 20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity