It almost sounded like advice to the RBI just ahead of the monetary policy scheduled for the end of this month. Finance Minister Chidambaram wants lower interest rates to spur investment and consumption.

The Finance Minister is met bankers in the capital today. Finance Minister P Chidambaram said that bank credit is growing at satisfactory rates and FY08 agriculture credit will exceed target, reports CNBC-TV18. April-September farm credit is at Rs 1.20 lakh crore, he stated. Banks' H1FY08 gross NPAs are at 2.6%.

Chidambaram added that the government aims to moderate interest rates in the medium-term. They wish deposit and lending rates come down by 50 bps. Chidambaram hopes for stable interest rates in the near-term.

 The FM also wants banks to not compete and push up deposit rates to keep costs of raising capital low. But India’s largest bank, SBI has hiked deposit rates by 25 percentage points across all maturities can be kept at a low level

According to the FM, rates can moderate if the monetary policy is supportive. Banks must not bid competitively for Q4 bulk deposits6. He also stated that banks will step- up lending to the consumer sector and all PSU banks will meet FY08 profit and lending targets.

Bank advances have grown by 22.2% as of December 7 and FY08 bank advances are growing by 24%, he stated.

Excerpts from the Finance Minister’s address:

“It is a very satisfactory rate of growth. This has happened, despite the increase in CRR. Bank credit to different sectors is also growing at a satisfactory rate. For example-credit to the small and medium enterprise sector up to September has grown by 18.12%.

Agricultural credit by the end of March was Rs 2,03,297 crore. In the first six months of this year it is Rs 1,20,062 crore. So, we will exceed the target fixed for this year too.  

Every bank has reported that they have improved upon their base of last year. The guideline is they must move from 9%, for the whole system, to 15% over three years. Every bank has reported that their credit to minorities is moving up as a proportion of total credit. Some have even done 11% and some have done 12%. But all of them are moving up. There is not one bank, which said that it is not able to improve the credit to minorities.

Education loans are, of course, a significant success.