| Chidambaram: Revision time
New Delhi, Oct. 5: The government wants banks to lower lending rates in order to provide respite to industry.
At a meeting with bankers and some industry representatives here today, finance minister P. Chidambaram suggested the rethink on rates. The bankers said they would be in a position to review after the Reserve Bank of India announced its monetary policy at the end of this month.
Chidambaram, at the meeting, told the industrialists present to price their products appropriately and ensure strong demand conditions during the festive season.
The chiefs of the State Bank of India, Punjab National Bank and ICICI were present. Industry was represented by the bosses of auto, auto components and paper companies.
“Everybody understands there is a problem. It has to be rectified,” said Jagdish Khattar, managing director of India’s largest car maker, Maruti Udyog Ltd.
Automobiles are going through a rough patch as rising rates take a toll on demand.
Khattar said the solution to the slowdown was with banks, though he admitted to rising borrowing costs of banks. “We have been doing whatever we can to keep sales going. In fact, this year our marketing expense will be 50 per cent more than last year.”
Gautam Thapar, chairman of paper maker Ballarpur Industries, said the industry needed some rate relief. He said demand remained strong this year but a negative sentiment would have a spiralling impact. “We might see a reduction in demand next fiscal.”
Top officials of Tata Motors said there was a conscious effort by the government to curb inflation by raising interest rates. This affected autos and realty the most.
“Last year, we had phenomenal growth in the festive season. It’ll be difficult to meet similar growth numbers now. I won’t single out any player in this regard,” Rajiv Dube, president (passenger cars), Tata Motors, said.
However, State Bank chairman .P. Bhatt and ICICI Bank chairman-cum-managing director K.V. Kamath said interest rates would remain stable till the monetary policy was reviewed on October 30.
Kamath said the deposit rates were still high and banks must first consider their own problems before taking steps to stimulate demand.
K.C. Chakrabarty, chairman and managing director of Punjab National Bank, said, “We will try to find out ways and means how these problems can be addressed.”