Interest rates are not likely to rise, finance minister P Chidambaram said on Monday, a day ahead of the Reserve Bank of India's monetary policy review, which, among other things, nudges banks to raise, hold or cut interest rates on deposits and loans.
The implication: if RBI governor D Subarao does oblige and keeps interest rates unchanged, it would mean that your EMIs on your house, car and personal loans will not rise anytime soon.
RBI has recently taken several measures to curb volatility in the rupee-dollar rate that many experts said could lead to a higher interest rate regime. The fear: this could lead to higher EMIs for individuals and higher costs for companies.
"I do not expect these liquidity measures to result in an increase in bank lending rates. All chairpersons of banks have told me that they have no plans to increase lending rates," Chidambaram said at a function here.
"The mandate of a central bank must not only be price stability… it includes price stability, growth and maximising employment," Chidambaram said.
The RBI has repeatedly disregarded hints from the government and demands from industry to cut in interest rates to promote growth, which has fallen from 9% two years ago to 5% last year.
On October 29, Chidambaram had said: "Growth is as much a challenge as inflation. If the government has to walk alone to face the challenge of growth, then we will walk alone."
This came after Subbarao had kept policy rates high to curb inflation despite the government unveiling a fiscal consolidation roadmap a day earlier.