The Hindu Business Line : Lenders likely to loosen grip, offer more credit

State & industry: The Gujarat Chief Minister, Mr Narendra Modi, and the CII President, Mr K.V. Kamath, at the India Economic Summit in the Capital on Sunday.

Our Bureau

New Delhi, Nov. 16

Lenders are expected to loosen their purse strings to make available more credit in the coming days on the back of the likely reduction in interest rates, the Confederation of Indian Industry President, Mr K.V. Kamath, has said.

This remark came in response to views expressed at the India Economic Summit 2008 here on Sunday that bankers may have clamped up following the global financial crisis and that they needed to ‘unfreeze’ to put back vigour in the credit markets.

“We will have to go back to customers to get back to growth,” Mr Kamath, who is also the Chief Executive of ICICI Bank, said, while continuing to be bullish on the Indian economy and its financial sector.

He said that the Indian financial sector was much cleaner than the global financial system.

“Arbitraging was one of the major reasons for the current global financial crisis. The fundamentals that created the crisis do not exist in India. Although we are insulated, we are still having some shocks,” he said.

Mr Kamath said that the current loss of confidence among industry was ‘understandable’ and that there were a number of reasons for this including liquidity squeeze and hardening of interest rates. “Fear has overtaken business…,” he noted.

Stating that liquidity easing has started to happen, Mr Kamath called for further easing on this front.

He noted that inflation had started to moderate on the back of fall in international crude oil prices and was poised to move down to 4-5 per cent levels in the coming months.

On the role of the Government in tackling the current crisis, Mr Kamath said the Indian industry had only asked for a facilitative environment. “I don’t think Indian industry had asked for bail-outs. They had asked for a facilitative environment in terms of interest rates etc.”