Nath asks banks to increase lending

Asking banks to increase lending to the industry, Commerce and Industry Minister Kamal Nath today said emerging markets, including India, will remain preferred investment destinations despite gloomy global environment.

With inbuilt resilience, Indian economy is set to grow by over 7 per cent this fiscal year, Nath said at the award function of the Export Promotion Council for SEZs and EOUs here.

"Liquidity has been injected into the system and this liquidity must turn into credit...Banks must lend," he said.

The government and the Reserve Bank of India (RBI) have already prodded the banks to increase lending.

Since mid-September 2008, the central bank has infused liquidity of over Rs 3,88,000 crore. The repo rate (at which RBI lends overnight funds to banks) has been reduced from nine per cent to 5.5 per cent and the reverse repo (at which RBI accepts deposits from the banks) to four per cent.

"Amid the gloomy global picture there was almost a consensus view that the emerging economies, including India that is showing its resilience and promises to grow in excess of seven per cent, will continue to a preferred investment destination," Nath said.

The central bank has also said in its GDP projection that the economy would grow by seven per cent -- lower than previous estimates of 7.5-8.0 per cent.