Chidambaram pushes case for RBI to relax monetary policy

Finance minister P Chidambaram, stressing his known proclivity for a liberal monetary policy, said today that there was a case for the Reserve Bank of India to cut interest rates, a day before the bank was due to announce its mid-quarterly monetary policy.

"We have argued on the government side that there is a case for lowering policy rates," Chidambaram told newspersons on the sidelines of a banking conference in New Delhi, but added that the decision was ultimately up to the central bank's governor.

Expressing concern over state-owned banks' rising exposure to bad loans, Chidambaram asked banks to take firm steps to recover these, saying the country cannot afford to have "affluent promoters and sick companies".

This was seen as a direct dig at liquor baron Vijay Mallya, promoter of the failed Kingfisher Airlines, the revival of which is increasingly looking impossible.

''We cannot have an affluent promoter and a sick company. Promoters must bring in money ... without doing anything that will kill the business of industry, banks will have to take steps to recover the NPAs," he said.

"We wish banks take firm steps to recover NPAs. Promoters have to bring in additional money and companies have the duty to pay back loans," Chidambaram said.

The finance minister said recovery has improved in the past one or two months and banks will take more steps to deal with the rising NPAs without hurting industry.

At the same time, gross NPAs of public sector banks have risen from Rs71,080 crore in March 2011 to Rs 1.55 lakh crore in December 2012.

Chidambaram further said that stalled projects in sectors like power, coal, iron, steel and road transport was a matter of worry.

As many as 215 projects involving an investment of Rs7 lakh crore are currently stalled and banks have disbursed about Rs54,000 crore in loans towards these, Chidambaram said.

''The real problem is in road and power. There are 68 new projects in the road sector. There are 40 new projects in the power sector. We have to get them going," he said, adding that the ministries concerned would look into the matter.