Finance Minister wishes more cut in loan rates but final decision rests with RBI

The Finance Minister P Chidambaram addressing the gathering of business leaders said he would like to see banks to cut interest rates further. He said "there is some scope for deposit rates to come down and hence, interest rates to drop".

And if this happens, it would account to be an added bonus for scores of urban Indians who are already feeling richer with tax concessions announced in the budget for 2008-09.

He added that the final decision will rest with the RBI, which has increased lending rates over the past two years to control inflation by leaving less money in the system.

The RBI's tight money stand brought down the sales of automobiles and consumer durables, which are driven by easy loans, and brought more hardship for middle-class families that have taken home loans with a floating-rate plan.

There has been no immediate reaction from the RBI to the minister's comments, but few have a hope for more cuts in interest rates, given that the inflation rate has firmed up in recent weeks. Last month on the persuasion of the finance minister Chidambaram several banks had slashed lending rates up to 50 basis points. MV Nair, Union Bank of India CMD, said banks might find it difficult to cut rates immediately.