Banks must act, loans must pick up: FM

Finance Minister P Chidambaram said on Thursday he anticipated a sharp pick-up in bank lending following the easing of the liquidity pressure.

Finance Minister P Chidambaram said on Thursday he anticipated a sharp pick-up in bank lending following the easing of the liquidity pressure.

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“As you perhaps know, I called the chairmen of the seven largest public sector banks on Monday and advised them that we should lend now,” he told reporters “All have said that lending will begin aggressively because now liquidity position is comfortable... I hope that message will go down.”

India Inc, caught in an attack of sluggish demand, surging input costs and dipping confidence, has sought easier and quicker access to bank funds to keep planned expansion projects going. “If you go by reverse repo, I think there is adequate liquidity. The point is banks should not park their excess funds with the RBI and should lend,” Chidambaram said.

Chidambaram said lending of stocks by foreign institutional investors (FIIs) to overseas entities would stop following directives issued by capital market regulator Securities Exchange Board of India (SEBI).

“SEBI has told them (FIIs) now that it disapproves of lending to offshore entities, and has asked them to reverse those transactions,”the minister said. “I am told that those transactions are likely to be reversed over the next few days.”