New Delhi, Aug 18 (IBNS): Union Finance Minister P Chidambaram on Saturday asked banks to cut interest rates and keep EMIs at affordable levels to boost consumer spending in a bid to revive flagging growth in Asia’s third largest economy.
Following a review meeting with the chiefs of public sector banks against the backdrop of slowdown in the economy, he said that one of the factors inhibiting the growth of the consumer durables industry were the relatively high loan paybacks.
"The middle class which is the consumer of consumer durables postpones the purchase and that is not good for industry, economy. Just as investment plans must be brought forward, consumer must be encouraged to buy consumer durables that is what will keep the engine of manufacturing going," he said.
"Consumer durables are the products which keep the production in the manufacturing industry going. Nearly the entire SME industry is dependent upon consumer durables because they supply parts and accessories."
"EMIs must be kept at an affordable level so that people will buy two-wheelers, buy cars, buy refrigerators, buy washing machines, cooking ranges," Chidambaram added.
"Once we get the investment cycle going, once we get the investment engine started I think many of our problems can get resolved. [Investor] sentiment is only one factor. Sentiment will change if the other issues are addressed," the minister said.
The banks meanwhile listed a number of issues that they felt are inhibiting investment, including fuel supply agreements, delay in clearances and approvals, land acquisitions and government entities not making payments in time.
"These are issues which have been identified as inhibiting. I will take up the issues with ministries concerned. Once we get the investment cycle going, once we get the investment engine started many of our problems can be solved. We have asked the banks to focus on sectors that deserve credit," Chidambaram said.