FM might ask banks to review lending rates

Says lower rates to industry for investments and to consumers for auto, housing and education loans will help give a push to growth

As banks choose to hold their lending rates despite rate cuts by the Reserve Bank of India (RBI) in the last few months, Finance Minister P Chidambaram might ask public sector lenders to review their interest rates.

At a review meeting with chiefs of state-run lenders on Wednesday, the finance ministry would take up the issue of high interest rates despite a 75 basis points rate cut by the central bank in 2013.

The finance ministry says lower rates to the industry for investment purposes and to consumers for auto, housing and education loans will help give a push to growth.

"Benefit of rate cut, non-performing assets (NPAs) and recovery, status of stalled and new projects, deposit and credit ratio, financial inclusion, and seeding of Aadhaar are some of the issues that would be discussed in the meeting of the finance minister with the chairmen and managing directors and chief executive officers of public sector banks and financial institutions," a finance ministry official told Business Standard.

Officials said as on March 31, there were 290 bank-funded projects of Rs 250 crore involving an investment of Rs 11,98,000 crore. Many of these are stuck up due to the lack of various clearances. "The status of opening of accounts under the Direct Benefits Transfer scheme and seeding of Aadhaar would be reviewed and the problems faced by banks in this regard would be heard," the official added.

Profitability of banks, loans to priority sectors such as agriculture, housing, education and micro, small & medium enterprises are also on the agenda. Performance of the Swavalambalan scheme under the National Pension System, lending to minority community and issues related to regional rural banks are also likely to be discussed. The finance minister is likely to ask the banks improve their lending to infrastructure and employment-generating sectors, while at the same time keep a check on their bad loans.

In his review meeting with banks in March, Chidambaram had come down heavily on wealthy promoters who are not servicing bank loans in the garb of their company making losses. Expressing concerns that NPAs and restructured accounts have risen, he asked banks to take firm action to recover their dues.