labels: finance - general, economy - general
Interest rates to remain favourable: FM news
31 March 2006

Mumbai: 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.

When 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.

Pointing 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.

Earlier this week, the RBI had permitted banks to offer London Inter-Bank Offered Rates on FCNR deposits. The banks till then could offer these rates at 25 basis points below LIBOR.

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Interest rates to remain favourable: FM