Center Expects Lowering of Interest Rates
By Neelima Shankar
May 25, 2009
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The Finance Ministry has expressed that the banks might lower the lending rates, considering the dipping industrial output levels, demand for cheaper funds and lower lending rates.

Ashok Chawla, finance secretary said, "We are very clear in our mind that the economic environment clearly points towards southward movement of the lending rates. Banks are aware of that and we expect them to move in that direction."

However, it is at the discretion of the banks to decide the time and quantum for rate cuts, "How much and when precisely (banks will cut rates) is the decision that banks have to take," said Chawla.

Earlier this year, the members of Associated Chambers of Commerce and Industry (ASSOCHAM) met the Prime Minister Manmohan Singh, expressing concern over the prevailing high interest rates, even when inflation had dipped to near-zero level. Following this, the central bank lowered the repo and reverse repo rates respectively by 25 basis points to encourage banks to lower the lending rates. But it was changes were not well received and most private bank continued with higher lending rates.

ICICI was amongst the first private players to lower the lending rate by 50 basis points followed by others.


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