PC, PM’s panel favour more interest rate cuts

NEW DELHI/MUMBAI: The government has asked monetary authorities to act swiftly to counter economic slowdown and set policy rates at a lower level, home minister P Chidambaram said on Tuesday. ���There is a case for deposit rates coming down, (and) lending rates coming down further. I think there is a case for the prime lending rate coming down (even more),��� he said at a function of the National Institution of Public Finance and Policy.

���What remains is that the ball is now squarely in the court of banks. For some reason banks have become completely risk-averse. We have to prod them, nudge them. In fact, in stronger words, to get moving. I think they have begun to move but not quite enough,��� he said.

Some government-run banks have cut lending rates by up to 100 basis points effective January 1. These banks have announced a rate cut for the second time in a month. Earlier, they had cut rates between 50 and 100 basis points from December 1. Government banks have also reduced the deposit rates by up to 100 basis points from January 1. But there has been no uniform rate cut from private banks.

Meanwhile, the prime minister���s high-level committee has suggested to the Reserve Bank of India to consider a 100 basis points cut in reverse repo and repo rates, the PM���s economic adviser Suresh Tendulkar said. Speaking at an event in Mumbai, Mr Tendulkar warned the unwarranted atmosphere of doom and gloom could result in an self-fulfilling prophecy if the pessimism continues. Mr Tendulkar said India does not face any recession threat and would continue to be the second-fastest growing economy as it is not dependent on external front as much as other emerging economies.

���There are still some teething problems in implementing the first stimulus package..... And the benefits have still not reached the end users,��� said Mr Tendulkar.