Finance Minister P Chidambaram today said that he would like PSU banks to cut deposit and lending rates by half a percent, to spur investment and consumption so that the economy can be sustained on a high growth path.

"I would like, I can't wish this, that banks cut lending and deposit rates by 50 basis points, so that it stimulates investment and consumption," he told reporters after the Quarterly Review with chairpersons of public sector banks. However, this has to be decided by each bank, taking into consideration its assets and liabilities, he said.

Chidambaram also foresaw stable interest rates and "possibly" moderate interest rates in the medium term, if the RBI's Monetary Policy is supportive. "At least, we should aim for stable interest rates and hope to moderate them in the medium term," he said.

The Finance Minister impressed upon the banks' chairpersons not to go for competitive bidding for bulk deposits because there was a huge price to be paid. "You (banks) should keep cost of money low so that cost of lending can be kept low... deposits are anyway growing at satisfactory rate," he said.

Inflation rose to 3.5% for the week ended December 22 as compared to 3.45% in the previous week, mainly on account of higher prices of some manufactured and fuel items.