The government on Thursday acknowledged that there is public demand that interest rates on home loans up to Rs 20 lakh should be slashed, but said it is for the banks and RBI to take a call.

During his post-budget interaction with Assocham, Finance Minister Mr. P. Chidambaram said, “I shall certainly bear in mind that there is public demand that interest rates for borrowers, who borrow (housing loans) up to Rs 20 lakhs, must be lowered”.

The Finance Minister further said that he agreed that housing loan borrowers of less than Rs 20 lakhs should be incentivised by lowering interest rates. As much as 80% of all housing loans fall in the category of below Rs 20 lakh, these loans have less risk weight than those above Rs 20 lakhs and, therefore, bankers have incentives to lend to these borrowers at lower interest rates.

Further he said, “He (RBI governor) can never please everyone. It is his judgment call what should be the interest rates in order to contain inflation and promote growth”. The RBI governor’s position to strike a balance between low inflation and high growth is unenviable.

Mr. Chidambaram said that he recognized that from the government’s point of view it is important to promote growth without stoking inflation.