Cut interest rates, keep EMIs at affordable level: FM to banks
New Delhi: Finance Minister P. Chidambaram Saturday called for increased consumer spending as a booster shot to the sagging economy and asked bankers to lower EMIs (equated monthly instalments) for consumer durable loans.
He said one of the factors inhibiting the growth of the consumer durables industry was the EMIs which should be kept at an affordable level.
The finance minister said the middle class is complaining that the EMIs had increased or the period of payment had been stretched.
"The middle class which is the consumer of consumer durables postpones the purchase and that is not good for industry, economy. Just as investment plans must be brought forward, consumer must be encouraged to buy consumer durables that is what will keep the engine of manufacturing going," he said.
"Consumer durables are the products which keep the production in the manufacturing industry going. Nearly the entire SME industry is dependent upon consumer durables because they supply parts and accessories. EMIs must be kept at an affordable level so that people will buy two-wheelers, buy cars, buy refrigerators, buy washing machines, cooking ranges," Chidambaram added.
After meeting the heads of public sector banks here, he said most of the country's economic problems will be solved once the investment cycle is revived.
"Once we get the investment cycle going, once we get the investment engine started I think many of our problems can get resolved," Chidambaram said after meeting chiefs of public sector banks.
"(Investor) sentiment is only one issue, the sentiment will change if the other issues are addressed," he added.
The banks have listed a number of issues which are inhibiting investment, including fuel supply agreements, delay in clearances and approvals, land acquisitions and government entities not making payments in time.
"I intend to address these issues in consultation with the ministries concerned," the minister said.
Chidambaram stressed that the government's aim is to quicken investment. Industries, business houses which have business plan must bring forward their investment plans rather than deferring it, he said.
He also advised banks to focus on sectors which deserve credit.