Chidambaram asks bankers to re-look high interest rates

Finance minister P Chidambaram on Friday asked bankers to ?re-look? the high interest rates that have slowed demand for new vehicles. The minister was chairing a high-level meeting of bankers and auto industry leaders.

Chidambaram gave a patient hearing to auto industry honchos that included Maruti MD Jagdish Khattar, Tata Motors MD Ravi Kant and Hero Honda MD Pawan Munjal.

Present from the banking sector were SBI chairman OP Bhatt, Bank of India CMD TS Narayanaswami, ICICI Bank CEO & MD KV Kamath and Punjab National Bank CMD KC Chakrabarty.

?The Finance Minister asked bankers to re-look interest rates in order to stimulate demand. Costs of the auto industry have increased and everybody understands there is a problem that has to be rectified,? Khattar said. Emphasising that the solution to the slowdown in demand was with the bankers, he said auto companies had been taking steps of their own to cushion the impact of high lending rates.

Tata Motors has already blamed the ?conscious intervention? of the government for the slowdown in the auto industry. Kant said he had raised the issue of interest rates with the finance minister.

While bike sales have been reeling as a result of high interest rates that have made the cost of financing dearer, car sales have still managed to grow on the back of discounting and a flurry of new models.

The auto industry had reason to cheer with some bankers immediately toeing Chidambaram?s line on moderating interest rates, which have risen by as much as 3-3.5 percentage points since last December. ?We will try to find ways and means to see how their problems can be addressed,? PNB?s Chakrabarty said, admitting that interest rates were a matter of concern. He said Chidambaram had asked bankers to create ?positive sentiments? to spur demand, though he refused to specify by when interest rates would be cut.

ICICI bank?s Kamath said his bank would take a view on revising interest rates after the RBI?s monetary policy on October 30.?There is a clear signal of a slowdown in retail loan growth, though the demand for credit from the corporate sector remains strong,? he admitted.

However, he added that banks had their own problems that needed to be addressed. ?Deposit rates have not come down,? he said, adding that bankers need to find ways to stimulate overall demand.