The government on Friday said interest rates will remain attractive to depositors as well as borrowers and the Reserve Bank of India would address the issue of shortage of lendable money in the system.
"These (hardening or softening of interest rates) are value judgements. All I can say is that interest rates will remain attractive to both depositors and borrowers," Finance Minister P Chidambaram told reporters on the sidelines of a Punjab National Bank function.
Higher interest rates reflect increase in demand for credit in the economy, Chidambaram said adding, "No one in the government can say rising credit demand is bad or too much."
Pointing out that the demand for credit reflects the need of different sectors of the economy, the finance minister said the issue that is to be addressed is the supply side of the credit.
"And RBI is seized of the issue (of liqudity). I am totally confident that RBI will address the issue of supply side of the credit," he said.
Pointing out that RBI has already taken first step to tackle liquidity by allowing banks to raise NRI deposit rates by 25 basis points, he said Reserve Bank Governor Y V Reddy is a competent person to tackle the issue of credit shortage.
Earlier this week, RBI had permitted banks to offer London Inter-Bank Offered Rates on dollar deposits of NRIs, called FCNR deposits.
The banks till then could offer these rates at 25 basis points below LIBOR. The central bank is scheduled to announce its quarterly monetary review on April 18.
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