Interest rates to moderate in 6-12 months: Chidambaram

BANGALORE: The current high interest rates in the country will begin to moderate in the next six to 12 months, Finance Minister P Chidambaram said on Friday.

"We will go back to moderate and normal interest rates in six to 12 months time. We will get out of this trough," he said, adding that "it has been a difficult year."

Interest rates have been going up since early 2007, every time after the Reserve Bank tightens monetary policy to contain runaway inflation fuelled by high global oil and commodities prices.

"Banks must find ways to mitigate the burden of high interest rate and adopt methods like mobilising low cost deposits," the finance minister said at the inauguration of public Sector Corporation Bank's 1000th and 1001st branch in HSR Layout and at Siddlaghatta respectively in Karnataka.

"There is enough money in the system, there is enough liquidity... but it is outside the banking system and must come inside", he said, adding that there must be a driven effort to grow CASA (current account savings account) deposits by at least 40 per cent.

Banks must improve efficiency and banking reach by adopting low cost business models like employing business correspondents and branchless methods of banking, he said.