New Delhi: Ruling out any government role in interest rate fixation, Finance Minister Yashwant Sinha on May 4 said the endeavour would be to take the economy towards softer interest regime.

"Inflation is well within control. Low inflation warrants softer interest rate regime. We want the economy to move in that direction", Sinha said at the National Cooperative Union of India in New Delhi.

The government, he said, has no intention of determining interest rates, which would be dependent on market conditions. "Interest rates have been totally deregulated, though in certain areas we intervene as and when necessary", he said.

Stressing the need for competition among banks, Sinha said they have to be competitive in order to meet the challenges thrown by the rapidly changing economic scenario.

He said financial institutions are also facing problems in raising cheap money as there is a cost involved in attracting deposits from the market.

Describing the multi-layer structure in cooperative banks as a cost escalating mechanism, the finance minister said the three-tier system at state, district and primary levels is adding to the cost substantially.

"It is important to deal with the challenge caused by high cost of intermediation. We are holding discussions on how the ultimate beneficiary will be able to get the benefit of a lower interest rate regime through reduction of intermediation", he said.

PTI