Finance Minister Nirmala Sitharaman speaks at an event organized by SBI.
Union Finance Minister Nirmala Sitharaman on Monday urged banks to make loans affordable, adding that current interest rates are “very stressful”. She was speaking at an event organized by SBI.
Currently, India needs to grow industries and invest in new facilities, adding that reducing lending rates can help achieve the “Developed India” aspiration, she added.
“What’s important is when you look at India’s growth needs, and you can have a lot of different voices and you can say that the cost of borrowing is really very stressful, and at a time when we’re going to be moving industries and moving toward building. increases. capacity, bank interest rates should be more affordable,” Sitharaman said.
Union Commerce Minister Piyush Goyal last week urged the Reserve Bank of India (RBI) to cut interest rates to boost economic growth. He also suggested looking at food prices while deciding monetary policy.
It may be noted that most commercial banks are directly or indirectly linked to the RBI’s calls on interest rates, with most using the loan repo rate as an external benchmark on which to price loans.
Consumer price inflation surpassed the RBI’s comfort level of 6 percent, with a reading of 6.2 percent for October, dampening hopes of an imminent rate cut.
Sitharaman said a set of three or four perishable commodities are currently driving headline inflation and the rest of the core items are at a manageable level of three or four percent.
The finance minister also made it clear that she did not want to get into the debate on whether food prices should be taken into account while constructing inflation indices or whether rates should be decided by the RBI’s Monetary Policy Committee.
Inflation is a complex issue that affects the common man, she said, adding that the government is working on supply-side measures including edible oil and pulses.
However, she added that India suffers from supply problems “cyclically” and the government’s efforts are mainly focused on improving storage facilities to reduce volatility.
Meanwhile, amid widespread concerns about a slowdown in growth, Seetharam assured that the government is fully aware of domestic and global challenges, adding that there is no need to have “unwarranted concerns”.
She said a number of high-frequency indicators point to strong activity on the ground.
Acknowledging that there are voices wondering whether the government’s fiscal consolidation is hurting economic activity, the finance minister denied any such and said growth is the government’s priority.
She also said for the rating upgrade that it is time for the independent rating agencies to decide on it.
Speaking at the annual business and economic conclave organized by SBI, Sitharaman also asked banks to focus on their core function of lending while stressing that “mis-selling” of insurance products also indirectly increases the cost of borrowing for entities.
This is very important from the point of view of increasing public confidence in the banking sector.
“Trust has to be built in the way you offer your portfolio, the way you offer your service and the way you look at each customer’s needs without lumping them into one category,” she said.
While the distribution of insurance by banks has increased insurance penetration, it has also raised concerns about mis-selling of products.
“Misselling…has indirectly increased or contributed to the cost of borrowing for consumers. So, banks have to focus on their core banking activities and not burden customers with insurance that they don’t need,” the minister said.
To gain public trust, banks should prioritize transparency, ethical practices and clear communication strategies, she added.
Meanwhile, Sitharaman said, small business loans are very important and for FY26 Rs. 6.12 lakh crore and for FY27 Rs. 7 lakh crore MSME credit target, on top of the 5.75 lakh crore he has asked them to do in FY25.
After achieving the goal of opening an account, the next objective of the banking system should be to channelize savings into risk capital formation as investment, provide insurance cover and offer wealth management solutions.
Seetharam expressed his dismay at countries backing out of climate change talks, calling it a “worrying” development and reminded everyone that climate change affects everyone. Unilateral measures to promote honest behavior imposed by the European Union are also “deeply worrying”. She stressed the need for global agreements.