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Interest rates will soon become reasonable, says Finance Minister

The lending rate of 14-15 per cent will make India uncompetitive in the global market and industry cannot invest at such high interest rates.

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A day after the Reserve Bank of India (RBI) cut interest rates by 0.25 per cent, Finance Minister Arun Jaitley on Thursday said interest rates will slowly become reasonable.

The lending rate of 14-15 per cent will make India uncompetitive in the global market and industry cannot invest at such high interest rates.

"Slowly interest rates will become reasonable," he said in the Lok Sabha while replying to a debate on the Banking Regulation (Amendment) Bill, 2017. The government insurer LIC has come out with a pension scheme to offer fixed rate of interest to investors. The minister said that pension funds are safe investments..

At a time when inflation was running high at 10 per cent, bank deposit rates were high at 9 per cent. But loans were extended by banks at 14-15 per cent, at which rate it was hard to attract global industrial investments, he said.

PM Narendra Modi had announced the Pradhan Mantri Vyaya Vandana Yojana (PMVYY) in December last year which was launched in May and offers senior citizens 8.3 per cent fixed rate of return. The minister also defended the State Bank of India's decision to cut interest rate on saving accounts of less than Rs 1 crore, saying the move was in sync with reduction in lending rate. High interest rate on savings and fixed deposits was during a time when inflation was 10-11 per cent and sluggishness was setting in the economy. So when the lending rate came down, so did savings account, Jaitley said.

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