Finance minister P. Chidambaram with CEOs of public sector banks in New Delhi on Wednesday. (PTI)

New Delhi, Aug. 13: Finance minister P. Chidambaram today said the increase in benchmark lending rates of banks would not affect existing home loans of up to Rs 30 lakh.

“Many banks have raised their benchmark lending rates by 0.75 per cent to 1 per cent. But all existing home, automobile and educational loans are being spared from the hike,” the minister told reporters after meeting chief executives of public sector banks here today.

During its quarterly monetary policy review on July 29, the Reserve Bank of India (RBI) had raised the cash reserve ratio and the repo rate by 50 basis points each to 9 per cent. Following the RBI’s move, many banks had raised their lending rates.

Chidambaram said bankers had assured him that credit would grow at a brisk pace and productive sectors would not be starved of funds.

“There is an overwhelming view that there is no slowdown in the demand for credit, though there is some slowdown in the demand for personal loans,” the minister said.

“So far as real estate is concerned, banks have imposed certain restraints but the demand for credit in this sector also continues to be very high,” he said.

Chidambaram said the profitability of banks had declined to some extent in the first quarter because of a fall in returns from treasury operations. He, however, hoped that some of the treasury losses would be recovered, if market sentiments improved.

Farm debt

The government will provide banks the first tranche of Rs 25,000 crore by September-end for the Rs 71,000-crore farm loan waiver implemented by them, a senior finance ministry official said today.

“We will give the first tranche of Rs 25,000 crore by September 30,” the official said after finance minister P. Chidambaram met heads of public sector banks here.

When asked, the finance minister evaded a direct reply, saying the first tranche would be paid to banks after the first supplementary is passed in Parliament.

SBI view

State Bank of India chairman . P. Bhatt feels interest rates in India have almost peaked.

“It (interest rate) has peaked or nearly peaked... Unless there is any further course of action” by the RBI, Bhatt told reporters here.

He cited the softening of oil prices, a good monsoon and lower prices of commodities, except steel, as factors contributing to the stability in interest rates.