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M. Ramesh

Chennai, Jan. 9 They call it moral suasion. The Ministry of Finance and the Reserve Bank of India will practically tell banks to liberalise lending, two senior members of the Government told Business Line.

“We will ensure that the banks do not profiteer,” the Union Minister of State for Industry, Dr Ashwani Kumar, said on Friday. The RBI and the Ministry of Finance will direct commercial banks to bring down the commercial lending rates.

Once capital becomes affordable and access to capital becomes easy, credit offtake will pick up, he said.

The same view was expressed by the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, on Thursday.

He said that RBI and the Ministry of Finance have been talking to banks, saying “don’t be carried away too much by the downturn in the economy. Several sectors are doing well and you have got to do some handholding (in terms of liberal lending).”

Mr Ahluwalia said that banks have parked about Rs 60,000 crore with the RBI (through “reverse repo”), but as RBI has reduced the interest it will pay on such deposits, banks will be looking for opportunities to lend.

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