Finance minister P Chidambaram today exhorted public sector bankers to ensure that retail loans are extended, especially for consumer durables and home buyers. The government has been striving to spur consumption in recent weeks to drive the country’s economic growth. “Consciously, over a period of a year, there has been a slowing down of credit growth. However, this slowing down of credit has indeed, to some extent, affected flow of credit to the housing sector and consumer durables sector,” Chidambaram after a review meeting with the bankers.“Some banks have already begun moving in that direction,” Chidambaram pointed out and hoped others follow suit. Along with credit delivery, credit quality was equally important, the FM stressed. While banks have already started cutting their lending rates by a quarter per cent, Chidambaram said rate cuts were not mooted by him at today’s meeting. “All I said is there is a feeling that adequate credit is not flowing to these sectors for one reason or another, so you must pay attention to these sectors because they are also drivers of economic growth.”Indian Banks Association chairman MBN Rao, however, indicated that if the ample liquidity being seen in the banking system continues, there would ‘naturally’ be a case for reduction in the interest rate. SBI, HDFC, Canara Bank, PNB Housing Finance and Bank of India have already announced a cut in lending rates. However, Chidambaram said the slowdown in credit growth has not affected flow of advances to productive sectors of the economy.At the meeting, public sector bank chief executives asked Chidambaram to exempt the banks from income tax and interest earned from investments in infrastructure bonds covering sectors like power and roads. They also wanted banks to be exempted from the fringe benefit tax (FBT) on their contribution to pension and other funds, besides seeking simplification of rules regarding tax deduction at source on deposits.The finance minister had called the public sector bank heads to seek “their suggestions on the Budget, and issues of credit quality, delivery and overall performance of the banks”. “They have made a number of suggestions — most of these are related to income tax. A Couple of them are old ones, but there are worthy of consideration. I told them I will examine those suggestions,” Chidambaram told reporters after the meeting.Without specifying which suggestions might be considered in the Budget, he said these suggestions would be considered like other “worthy suggestions” received from industry, business and other quarters.
