Reserve Bank Governor D Subbaro said there is scope for banks to lower lending rates further.
“Banks say that the demand for credit is picking up on the back of investment in projects…Banks have scope to reduce the lending rates,” Subbarao told in his customary post-credit policy press conference,justifying the bank’s decision to keep the key rates unchanged.
The RBI governor said bankers informed him that the demand for credit in certain segments like home and retail is picking up,which was a welcome sign.
Subbarao said he saw visible signs of economic recovery. However,he said,there are certain risk factors in the economy,especially in the farm sector,given the uncertainty over the monsoon.
He expressed concern that the performance of farm sector could have a spill over effect on the industrial sector as well.
Subbarao also felt that exports have not picked up,recording a slowdown for the last eight months. Though exports form only 15 per cent of the GDP,it could pose risks to the economic revival,he said.