FM makes a case for cheaper bank loans

Piyush Goyal earlier asked to skip food prices in rate decisions

- Shayan Ghosh

In what appears to be a concerted nudge for interest rate cuts, Union finance minister Nirmala Sitharaman on Monday called for bank lending rates to be more affordable, the second senior minister to highlight the matter in less than a week.

"Equally, I think what is important is when you look at India's growth requirements, and you have so many voices coming out and saying the cost of borrowing is really very stressful..." Sitharaman said at a State Bank of India event.

"...at a time when we want industries to ramp up and build capacities, our bank interest rates will have to be far more affordable."

The central bank's monetary policy committee (MPC) has held interest rates unchanged since February 2023, and sticky food inflation is expected to make it difficult to lower rates before February 2025.

Given that 58% of all floating rate bank loans are linked to an external benchmark—mostly to the repo rate—consumers will see cheaper loans only when RBI cuts the benchmark rate.