• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

This is with reference to the report ‘Chidambaram for lower rate regime’ (Business Line, December 5) and the editorial ‘Toward easier interest rates?’ (Business Line, December 7).

The editorial conclusion that “small enterprises with potential to grow and little means to do it need credit too” is the right assessment.

Generally, softening of interest rates on lending would be a welcome step. But reduction of interest rates on deposits may not be without its own adverse consequences, especially for the struggling middle classes.

While the step may boost consumerism somewhat, there is bound to be diversion of savings to other gainful schemes, especially mutual funds, which hog the limelight as highly growth-oriented saving schemes.

The deposit interest rates are already a dismal, unattractive option for domestic savings, which constitute a large chunk of the bank deposits, and any further reduction in the rates will impact on the growth of deposits.

This, coupled with a likely boost in credit-offtake, is bound to lead to a serious liquidity crunch for the banks because of a fall in deposits.

T. R. Anandan Coimbatore

More Stories on : Letters | Interest Rates

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Inclusive innovation

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line