Chidambaram assures industry of cheaper bank loans

Finance Minister Palaniappan Chidambaram speaks with the media in Mumbai in this August 29, 2008 file photo. The finance minister will ask state-run banks to lower lending rates to help revive sagging industrial growth, industry officials said on Monday.

NEW DELHI (Reuters) – The finance minister will ask state-run banks to lower lending rates to help revive sagging industrial growth, industry officials said on Monday.

Heads of three leading industry bodies -- CII, FICCI and ASSOCHAM -- met Finance Minister Palaniappan Chidambaram to highlight the problems they were facing in the wake of slack domestic demand and a global credit crisis.

"The FM has assured us that the government will persuade the banks to reduce interest rates," Sajjan Jindal, the president of ASSOCHAM and managing director of JSW Steel, told reporters after the meeting.

On Saturday, the Reserve Bank of India unexpectedly cut its repo rate or main short-term lending rate by 50 basis points to 7.5 percent and banks' cash reserve (CRR) requirements by 100 basis points to 5.5 percent.

It also cut banks' bond reserve requirements (SLR) by 1 percentage point to 24 percent of their deposits.

"There is a global shift towards a soft interest rate and after the fall in oil and commodity prices, focus has shifted from inflation to growth," K V Kamath, ICICI Bank chief executive and president of Confederation of Indian Industry (CII), said.

"RBI stance is in line with global soft interest rate bias. He (finance minister) assured us that enough liquidity will be infused in the system," Kamath said.

Although a senior official of Indian Banks' Association said there was an indication of a "downward spiral in interest rates", very few banks have announced cut in lending rates so far.

The meeting with industry bodies comes a day ahead of the finance minister's quarterly review meeting with chairmen of state-run banks on Tuesday.