Finance Minister P Chidambaram on Friday asked the bosses of state-owned banks to bring down the cost of funds so that lending rates can be kept low.
After Friday's quarterly review meeting with bank chairmen, Chidambaram said he would like public sector banks to cut deposit and lending rates by half a percentage point to spur investment and consumption so that the economy could sustain rapid growth. He, however, added that this had to be decided by each bank based on its assets and liabilities. "I would like, I cannot wish this, that banks cut lending and deposit rates by 50 basis points so that it stimulates investment and consumption," he said.
However, banks said this would be a tough job because the cost of deposits remained high. The chairman of a leading bank suggested that public sector undertakings should be asked to keep their deposits with government-owned banks. "Private banks are offering high deposit rates to these public sector undertakings, which is adversely affecting the overall cost of funds," the banker said at the meeting.