Concerned over banks' decision to raise interest rates, the government has asked public sector banks to take prior approval from their board of directors before effecting hike in interest rates.
"Yes we have advised the banks that decision on rate increase has to be taken by the respective Boards," Finance Minister P Chidambaram told reporters.
Since the government has majority stakes in the banks and there are government nominees on the boards, it is right for the Finance Ministry to advise banks on interest rate hikes, he said.
"What is wrong in it?" Chidambaram said when asked whether this would be construed as government interference in the autonomous functioning of banks.
He, however, said that it was up to the banks to decide on interest rates and the government would only give its views.