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Wednesday, Feb 13, 2008
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Banks asked to lend more for housing

Special Correspondent

NEW DELHI: Conceding that there had been a slowdown in demand for housing and consumer durables, Finance Minister P. Chidambaram on Tuesday asked public sector banks to ensure adequate funds to these sectors as they have been partly hit by a “conscious” moderation in the flow of credit during the past one year.

Briefing newspersons after his meeting with the chiefs of public sector banks (PSBs), Mr. Chidambaram said: “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.”

These issues had come up for discussion and the bank chiefs were advised to meet the credit needs of home seekers as also buyers of consumer durables and non-durables. Some banks, he said, were already in the process of doing so and he hoped that other PSBs would also focus on such credit requirements over the next few days.

As to whether the availability of easy credit would also mean a further cut in interest rates, Mr. Chidambaram said: “You ask bankers. 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 these sectors are drivers of economic growth also… [The] Government does not give them directions or orders. We have sensitised them to the need of the housing sector and consumer durables.”

While a number of leading banks have already announced reduced lending rates, bankers noted that they expected a further cut in interest rates owing to ample liquidity in the system. “With ample liquidity in the banking system, pressure on rates has eased,” Indian Banks’ Association Chairman M.B.N. Rao said on the sidelines of the meeting.

The Finance Minister’s advice to the bank chiefs appears to have come well in time as the industrial growth data released on Tuesday revealed a negative growth of 1.3 per cent in the production of consumer durables during the first nine months of the current fiscal as compared to a robust 11.2 per cent growth witnessed in the same period a year ago. Alongside, the growth in consumer non-durables also declined to 8.4 per cent from 9.5 per cent over the same period. Overall, the non-food credit extended by commercial banks went up by 11.8 per cent this fiscal up to January 4 this year as compared to a rise of 17.5 per cent in the same period of 2006-07.

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