On Thursday, the government recognized the rising public demand for reduced interest rates on home loans, specifically those not exceeding Rs 20 lakh; however, it ultimately deferred the decision to the banks and the Reserve Bank of India (RBI).
During a discussion following the budget with Assocham, Finance Minister Mr. P. Chidambaram stated, "I shall certainly bear in mind that there is public demand that interest rates for borrowers, who borrow (housing loans) up to Rs 20 lakhs, must be lowered."
He elaborated that he acknowledges that those who take out housing loans of less than Rs 20 lakhs should indeed be incentivized through the lowering of interest rates. Notably, a significant 80% of all housing loans are classified within this financial range; these loans carry a lower risk weight than those surpassing Rs 20 lakhs, thereby providing bankers with a strong motivation to offer these borrowers reduced interest rates.
Furthermore, Mr. Chidambaram remarked, "He (RBI governor) can never please everyone. It is his judgment call what should be the interest rates in order to contain inflation and promote growth." The role of the RBI governor in balancing the objectives of maintaining low inflation while encouraging high growth is undoubtedly a challenging task.
In his concluding remarks, Mr. Chidambaram emphasized that from the government's perspective, it remains critical to foster growth without igniting inflation.