Auto, consumer durables loans set to get cheaper, farm loans to be rescheduled

NEW DELHI: Monthly instalments or EMIs on new auto loans and consumer durables finance are set to come down with finance minister P Chidambaram nudging public sector bank chiefs to lower the burden on consumers to prop up demand and investment.

Soon after, banks said they would review the rate structure and come up with ways to reduce the pocket pinch. "He (FM) advised banks to consider reducing interest rates for consumer durables," SBI chairman Pratip Chaudhuri said. Punjab National Bank chief K R Kamath said the bank would look at the options available.

Interest rates have gone up sharply since mid-2010 as RBI has raised policy rates 13 times to tame inflation. With prices, especially food prices, remaining high, the central bank has been reluctant to sharply reduce rates, although it has made more cash available with banks, prompting some of them to lower the cost of loans.

Chidambaram's intervention signals the recognition that the price situation — with inflation dropping to a three-year low — gives room for the government to seek lower interest rates as the driver for growth.

After a review meeting with the chiefs of public sector banks against the backdrop of slowdown in the economy, finance minister also announced rescheduling of farm loans in drought affected states and revision in procedures for easy sanction of education loans to students.