The Hindu : Business : Repo rate hike to help moderate credit growth: FM

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Wednesday, Nov 01, 2006
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Repo rate hike to help moderate credit growth: FM

This would push banks to improve credit quality

LUDHIANA: Endorsing the Reserve Bank of India's decision to hike the repo rate by 25 basis points, Finance Minister P. Chidambaram on Tuesday said it was a subtle signal to banks to moderate credit growth.

"If they (banks) lend more than their resources and come to the RBI, then they should be ready to pay 25 basis points more,'' he told reporters in his reaction to the RBI's busy season credit policy.

In the busy season period now, he said banks must keep the RBI signal in mind and moderate credit growth without affecting the productive sectors. "I endorse the decision of the RBI hiking the repo rate as it is primarily aimed to moderate the credit growth in the country,'' Mr. Chidambaram said.

The hike in the repo rate to 7.25 per cent would also push banks to improve credit quality, he said, but added that interest rates would remain stable. Mr. Chidambaram, who was here to attend the convocation of the Punjab Agricultural University, said he would meet top banking officials on November 6 to take stock of the situation.

On price rise, Mr. Chidambaram said the RBI had been taking steps to curb the inflationary pressures on the economy.

Elated over the Sensex reaching the 13000-mark on Monday, Mr. Chidambaram said the new high attained by the BSE index was good for investors. — PTI

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