Following finance minister P. Chidambaram's plea to banks to take steps to accelerate growth in banking sector, public sector banks have responded by either reducing the interest rates or by eliminating the processing fees on car and home loans to increase demand in the market.

It is reported that the finance minster is happy with the steps taken by the banks. At a recent meeting held by the minister with the chiefs of various public sector banks, he is said to have urged banks to introduce reduced interest rates on various loans to accelerate growth in retail loans segment.

The banks which have heeded finance minister's advice include banks like Bank of India, Central Bank of India, Canara Bank, Indian bank, Allahabad Bank and Bank of Baroda. These lenders have introduced interest rate cuts in home loans or car loans or have slashed their processing fees completely on these loans.