Stating that low interest rates spur economic growth, Finance Minister P. Chidambaram on Saturday asked banks to improve their operational efficiency to bring down the rates, and pass on the benefit to borrowers.

“Banks should try to rationalise interest rates offered to a large extent, lower interest rates depend on policy rates. Banks can attempt to improve their operating efficiency, reducing costs, and pass on the benefit to borrowers through lower interest rates,” a State Bank of India statement quoted Mr. Chidambaram as saying.

“Lower interest rates would act as a spur to economic growth and alter customer sentiment,” he added.

Mr. Chidambaram spoke to the SBI brass at the headquarters of the country’s largest lender during his visit here.

The Reserve Bank of India recently lowered its key lending rate by 0.25 per cent and complimented it with a similar reduction in the cash reserve ratio to infuse liquidity.

Some banks have passed the benefit to the borrowers by a similar extent, but many others have desisted, citing high cost of funds, which is attributed to the slower growth in deposits.

Official data released yesterday said growth in 2012-13 is estimated to fall to 5 per cent.

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