EMIs on car, two-wheeler and consumer goods loans will fall soon. Public sector banks will provide cheaper loans on these items ahead of the festive season in order to generate demand and kick start the sputtering economy.
Following a meeting between finance minister P Chidambaram, Reserve Bank of India governor Raghuram Rajan and department of economic affairs secretary Arvind Mayaram in Delhi on Thursday, the government announced that it would provide additional capital to state-owned banks to enable them to provide such cheaper loans.
Chidambaram had, in his budget, announced that Rs. 14,000 crore would be provided to recapitalise banks. “This amount will be enhanced sufficiently,” a finance ministry statement said.
”We are awaiting details but this move will increase consumer demand,” M Narendra, chairman and managing director, Indian Overseas Bank, told HT.
In July, consumer durables output had dropped 9.3%, against a growth of 0.8% in the corresponding month in the previous year. The segment registered a 12% decline in output in the April-July period against a growth of 6.1% in the previous corresponding period.