Repo rate hike to help moderate credit growth: Chidambaram

LUDHIANA: Endorsing the RBI's decision to hike repo rate by 25 basis points, Finance Minister P Chidambaram on Tuesday said it was a subtle signal to banks to moderate credit growth.

"If they (banks) lend more than their resources and come to Reserve Bank, then they should be ready to pay 25 basis points more," he told reporters in his reaction to RBI's busy season credit policy.

In the busy season period now, he said banks must keep RBI signal in mind and moderate credit growth without affecting the agricultural sector.

"I endorse the decision of RBI hiking repo rate as it is primarily aimed to moderate the credit growth in the country," Chidambaram said.

The hike in repo rate to 7.25 per cent would also push banks to improve credit quality, he said, but added that interest rates would remain stable.

Chidambaram, who was here to attend the convocation of Punjab Agricultural University, said he would meet top banking officials on November 6 to take stock of the situation.

On price rise, Chidambaram said RBI had been taking steps to curb the inflationary pressures on the economy.

Elated over the Bombay Stock Exchange's benchmark index reaching the 13,000 mark on Monday, Chidambaram said the new high attained by the Sensex was good for investors.