FM pitches for lower rates for home loans up to Rs 20 lakh
0 views
Skip to first unread message
Sukumar
Mar 6, 2008, 11:13:34 PM3/6/08
to Kences1
Making a strong case for a cut in interest rates on home loans of up
to Rs 20 lakh, Finance Minister P Chidambaram has said he would
continue to talk to bankers as these accounts, which form a lion's
share of total borrowing for housing, carry less risk weightage.
The Finance Minister, however, in the same breath added that the ball
is in the court of banks and Reserve Bank.
"I made a number of efforts to impress upon bankers in this regard...
it is a constant effort that I will have to make... bankers will have
to take a call, RBI will have to take a call," Chidambaram said in his
post-budget interaction with industry chamber Assocham in New Delhi on
Thursday.
Following the Reserve Bank's tight monetary policy initiatives,
interest rates on housing loans have shot up to the range 10-12
percent, bringing the demand sharply down.
If the rate of inflation is high, RBI tightens monetary policy,
leading to higher interest rates.
But at its last monetary review in January, RBI kept all key rates
intact.
But even then many banks, including market leader SBI, cut interest
rates after RBI said their net interest margin is still high.
The Finance Minister said he agreed that housing loan borrowers of
less than Rs 20 lakh should be incentivised by lowering interest
rates.
As much as 80 percent of all housing loans fall in the category of
below Rs 20 lakh, he said, adding that these loans have less risk
weight than those above Rs 20 lakh.
Therefore, bankers have incentives to lend to these borrowers at lower
interest rates.
"I shall certainly bear in mind that there is public demand that
interest rates for borrowers, who borrow (housing loans) up to Rs 20
lakh, must be lowered," Chidambaram said.
At the same time he also defended the RBI stance. The RBI governor's
position to strike a balance between low inflation and high growth is
unenviable, he said.
"He (RBI governor) can never please everyone. It is his judgement call
what should be the interest rates in order to contain inflation and
promote growth," the Finance Minister said.
Chidambaram said he recognised that from the government's point of
view it is important to promote growth without stoking inflation.
No danger of economy overheating: Chidambaram
Allaying fears of overheating of economy, the Government exuded
optimism that growth story would continue in 2008-09 too,
notwithstanding the weak global trends.
Finance Minister P Chidambaram, in his post-Budget interaction with
industry chamber Assocham, drew parallels with neighbouring China and
referred to its Prime Minister Wen Jibao's speech to drive home the
point that the growth story must be intact.
"Wen told Parliament of China...growth story must be intact but it
should not lead to overheating.... in our case growth story must be
intact, there is no danger of overheating in India," the Finance
Minister said.
"He (Wen) said we (China) must control inflation, their inflation is
7.1 percent and ours is 4.89 percent and we must also control
inflation," Chidambaram said.
Both the countries make similar progress and must learn from each
other, Chidambaram said.
"The only difference is that while Chinese are proud of their
achievements, we seem to be too modest about what we have achieved in
the last 15 years. We should take pride in what we have done, but
there is still a long road ahead," he said.
Chidambaram said, "It is our intention to keep growth story intact and
going, it is my intention to keep growth close to 9 percent, and
inflation close to 4 percent... Despite clouds over our heads, thanks
to global trends, I look forward to another year of high growth."
He said India is not entirely de-coupled from the rest of the world.
"We are a part of the world. Globalisation indeed offers us
opportunities, globalisation also affects us."
Stating that the batting average of the UPA Government is 8.8 percent
in four years, the Finance Minister said, "I intend to close this
innings with a batting average of close to 8.8 or perhaps higher than
8.8, not lower than 8.8."
He hoped that it would the UPA Government's Chidambaram said, "It is
our intention to keep growth story intact and going, it is my
intention to keep growth close to 9 percent, and inflation close to 4
percent... Despite clouds over our heads, thanks to global trends, I
look forward to another year of high growth."
He said India is not entirely de-coupled from the rest of the world.
"We are a part of the world. Globalisation indeed offers us
opportunities, globalisation also affects us."
Stating that the batting average of the UPA Government is 8.8 percent
in four years, the Finance Minister said, "I intend to close this
innings with a batting average of close to 8.8 or perhaps higher than
8.8, not lower than 8.8."
He hoped that it would be UPA Government's first innings only when it
comes to an end.
to Rs 20 lakh, Finance Minister P Chidambaram has said he would
continue to talk to bankers as these accounts, which form a lion's
share of total borrowing for housing, carry less risk weightage.
The Finance Minister, however, in the same breath added that the ball
is in the court of banks and Reserve Bank.
"I made a number of efforts to impress upon bankers in this regard...
it is a constant effort that I will have to make... bankers will have
to take a call, RBI will have to take a call," Chidambaram said in his
post-budget interaction with industry chamber Assocham in New Delhi on
Thursday.
Following the Reserve Bank's tight monetary policy initiatives,
interest rates on housing loans have shot up to the range 10-12
percent, bringing the demand sharply down.
If the rate of inflation is high, RBI tightens monetary policy,
leading to higher interest rates.
But at its last monetary review in January, RBI kept all key rates
intact.
But even then many banks, including market leader SBI, cut interest
rates after RBI said their net interest margin is still high.
The Finance Minister said he agreed that housing loan borrowers of
less than Rs 20 lakh should be incentivised by lowering interest
rates.
As much as 80 percent of all housing loans fall in the category of
below Rs 20 lakh, he said, adding that these loans have less risk
weight than those above Rs 20 lakh.
Therefore, bankers have incentives to lend to these borrowers at lower
interest rates.
"I shall certainly bear in mind that there is public demand that
interest rates for borrowers, who borrow (housing loans) up to Rs 20
lakh, must be lowered," Chidambaram said.
At the same time he also defended the RBI stance. The RBI governor's
position to strike a balance between low inflation and high growth is
unenviable, he said.
"He (RBI governor) can never please everyone. It is his judgement call
what should be the interest rates in order to contain inflation and
promote growth," the Finance Minister said.
Chidambaram said he recognised that from the government's point of
view it is important to promote growth without stoking inflation.
No danger of economy overheating: Chidambaram
Allaying fears of overheating of economy, the Government exuded
optimism that growth story would continue in 2008-09 too,
notwithstanding the weak global trends.
Finance Minister P Chidambaram, in his post-Budget interaction with
industry chamber Assocham, drew parallels with neighbouring China and
referred to its Prime Minister Wen Jibao's speech to drive home the
point that the growth story must be intact.
"Wen told Parliament of China...growth story must be intact but it
should not lead to overheating.... in our case growth story must be
intact, there is no danger of overheating in India," the Finance
Minister said.
"He (Wen) said we (China) must control inflation, their inflation is
7.1 percent and ours is 4.89 percent and we must also control
inflation," Chidambaram said.
Both the countries make similar progress and must learn from each
other, Chidambaram said.
"The only difference is that while Chinese are proud of their
achievements, we seem to be too modest about what we have achieved in
the last 15 years. We should take pride in what we have done, but
there is still a long road ahead," he said.
Chidambaram said, "It is our intention to keep growth story intact and
going, it is my intention to keep growth close to 9 percent, and
inflation close to 4 percent... Despite clouds over our heads, thanks
to global trends, I look forward to another year of high growth."
He said India is not entirely de-coupled from the rest of the world.
"We are a part of the world. Globalisation indeed offers us
opportunities, globalisation also affects us."
Stating that the batting average of the UPA Government is 8.8 percent
in four years, the Finance Minister said, "I intend to close this
innings with a batting average of close to 8.8 or perhaps higher than
8.8, not lower than 8.8."
He hoped that it would the UPA Government's Chidambaram said, "It is
our intention to keep growth story intact and going, it is my
intention to keep growth close to 9 percent, and inflation close to 4
percent... Despite clouds over our heads, thanks to global trends, I
look forward to another year of high growth."
He said India is not entirely de-coupled from the rest of the world.
"We are a part of the world. Globalisation indeed offers us
opportunities, globalisation also affects us."
Stating that the batting average of the UPA Government is 8.8 percent
in four years, the Finance Minister said, "I intend to close this
innings with a batting average of close to 8.8 or perhaps higher than
8.8, not lower than 8.8."
He hoped that it would be UPA Government's first innings only when it
comes to an end.
Reply all
Reply to author
Forward
0 new messages