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Union Finance Minister Nirmala Sitharaman on Monday said people are finding current interest rates "very stressful" and urged banks to make them affordable.
Speaking at an event organised by State Bank of India, the finance minister said that at present, India requires industry to ramp up and invest in new facilities, and added that lowering lending rates can help achieve the "Viksit Bharat" aspiration.
"What is important is when you look at India's growth requirements, and you can have so many different voices coming out and saying the cost of borrowing is really very stressful, and a time when we want industries to ramp up and move (to) building capacities, bank interest rates will have to be far more affordable," Sitharaman said.
Union Commerce Minister Piyush Goyal last week urged the Reserve Bank of India (RBI) to cut interest rates to boost economic growth. He also suggested looking through food prices while deciding on monetary policy.
It can be noted that most of the commercial banks are tied directly or indirectly to the RBI's calls on interest rates, with the majority of loans using the repo rate as an external benchmark to which loan prices are pegged.
The consumer price inflation overshot the RBI's comfort level of 6 per cent, with the 6.2 per cent reading for October dashed hopes of a rate cut soon.
Sitharaman said a set of three or four perishable commodities is driving the headline inflation, currently, and the rest of it, the core items, are at manageable levels of three or four per cent.
The finance minister also made it clear that she does not want to get into the debate of whether food prices should be considered while constructing the inflation indices or to take calls on rates by the RBI's monetary policy committee.
Inflation is a complex issue which affects the common man, she said, adding that the government has been working on the supply side measures, including edible oils and pulses.
However, she was quick to add that India "cyclically" suffers from supply issues and the government efforts are mainly focused on improving the storage facilities to lessen the volatilities.
Meanwhile, amid widespread concerns about a slowdown in growth, Sitharaman assured that the government is fully aware of the domestic and global challenges and added that there is no need to have "undue concerns".
She said that a slew of high-frequency indicators are pointing to strong activity on the ground.
Acknowledging that there are voices wondering if the government's fiscal consolidation is hurting economic activity, the finance minister denied any such thing, saying that growth is a priority for the government.
She also pitched for a rating upgrade, saying it is time for independent rating agencies to take a call on it.
Speaking at the annual business and economic conclave organised by SBI, Sitharaman also asked banks to concentrate on their core function of giving loans while stressing that the "misselling" of insurance products also indirectly adds to the cost of borrowing for an entity.
This is very important from the point of view of increasing people's trust in the banking sector.
"Trust should be built by the way you offer your portfolios, by the way you offer your service, and by the way you look at each customer's requirement without clubbing them into one class," she said.
While banks' distribution of insurance has led to a deepening of insurance penetration, it has also raised concerns about the misselling of products.
"Misselling...has added or contributed in indirect ways of increased cost of borrowing for the customers.
"So, banks will have to look at it with a lot more emphasis on their core banking activities and not burden the customers with insurances which they don't require," the minister said.
To earn the trust of people, banks must prioritise transparency, ethical practices and clear communication strategies, she added.
Meanwhile, Sitharaman said, small business loans are very important and set an MSME lending target of Rs 6.12 lakh crore for FY26 and Rs 7 lakh crore for FY27, on top of the Rs 5.75 lakh crore she has asked them to do in FY25.
Having achieved the goal of account opening, the next aim for the banking system should be to channelise the savings into risk capital formation as investments, giving insurance covers and also offering wealth management solutions.
Sitharaman expressed her dismay at countries withdrawing from climate change negotiations, terming it as a "worrying" development and reminding all that climate change impacts all.
Unilateral measures on promoting conscientious behaviours like the ones imposed by the European Union are also "very worrying", she said, stressing that the need is to have global agreements.