According to finance minister P Chidambaram interest rates
will remain attractive to depositors as well as borrowers.
He said the Reserve Bank would address the issue of shortage
of lendable funds in the system.
asked about the recent increase in the repo and reverse
repo rate, Chidambaram said that the hardening or softening
of interest rates was a value judgements since higher
interest rates reflected the increase in demand for credit
in the economy, which could not be considered bad.
out that the RBI had already taken the first step to tackle
liquidity by allowing banks to raise NRI deposit rates
by 25 basis points, he said RBI governor Y V Reddy was
competent to handle the issue of credit shortage.
this week, the RBI had permitted banks to offer London
Offered Rates on FCNR deposits. The banks till then could
offer these rates at 25 basis points below LIBOR.