New Delhi, India — Speaking at an event organized by the State Bank of India (SBI), Union Finance Minister Nirmala Sitharaman called on banks to make loans more affordable, describing the current interest rates as “very stressful” for businesses and individuals alike. She emphasized that lower lending rates are essential to achieving India’s vision of “Viksit Bharat” (Developed India).
Affordable Lending and Economic Growth
Highlighting the need for industries to scale up and invest in new facilities, Sitharaman said, “India’s growth requirements demand that bank interest rates become far more affordable.” She noted that high borrowing costs are a hurdle to capacity building and economic expansion.
Her remarks come days after Union Commerce Minister Piyush Goyal urged the Reserve Bank of India (RBI) to consider rate cuts, suggesting that the central bank look past temporary spikes in food prices when formulating monetary policy.
Inflation Challenges and Government Measures
India’s consumer price inflation recently breached the RBI’s comfort zone, reaching 6.2% in October. Sitharaman attributed the spike to a handful of perishable commodities but reassured that core inflation remains manageable at 3–4%.
The Finance Minister also acknowledged the cyclical supply issues India faces, emphasizing government efforts to bolster storage facilities and stabilize supply chains. While steering clear of debates over the role of food prices in inflation indices, she underscored the government’s focus on supply-side measures to ease price pressures on essentials like edible oils and pulses.
MSME Lending Targets and Banking Practices
Sitharaman set ambitious lending targets for micro, small, and medium enterprises (MSMEs), with Rs 5.75 lakh crore for FY25, Rs 6.12 lakh crore for FY26, and Rs 7 lakh crore for FY27. She urged banks to prioritize their core function of providing loans, cautioning against the “misselling” of insurance products, which she said indirectly increases borrowing costs for customers.
“Banks must rebuild trust by focusing on customer-specific requirements and ethical practices,” she said, adding that while insurance distribution has boosted penetration, it must not burden borrowers unnecessarily.
Global and Domestic Outlook
Addressing concerns about growth and fiscal consolidation, Sitharaman assured that the government remains committed to economic expansion despite global uncertainties. She highlighted strong high-frequency indicators of economic activity and dismissed worries that fiscal consolidation was hindering growth.
The Finance Minister also advocated for a sovereign rating upgrade for India, urging independent rating agencies to reassess the country’s economic performance.
Climate Change and Global Cooperation
On the global stage, Sitharaman expressed concern over countries withdrawing from climate change negotiations. She called for unified global agreements, cautioning against unilateral measures like those imposed by the European Union, which she described as “very worrying.”
The event underscored the government’s focus on making credit accessible, tackling inflation, and fostering trust in the financial system, as India aims for robust and sustainable economic growth.
