Friday, June 17 2005 20:09 Hrs (IST) - World Time -

New Delhi: Finance Minister P Chidambaram today (Jun 17, 2005) sought to allay fears that interest rates will go up in the face of the decision of ICICI Bank and HDFC to hike home loan rates by 0.50 per cent.

"I do not think the hike announced by two private sector banks on home loans indicate there will be a general rise in interest rates," he told Zee Business television channel.

"They (HDFC and ICICI Bank) are seizing an opportunity for profit... All I can say is that in the medium term the interest rates would remain benign," he said in an interview to be telecast tomorrow (Jun 18, 2005).

Ruling out dilution of Government holding in PSU banks below 51 per cent, he said four entities -- Central Bank of India, Punjab & Sind Bank, United Bank of India and Indian Bank -- would eventually be listed on bourses.

Admitting that further opening of the insurance sector was on a slow track, he said, "The Insurance Bill is not coming now (in the monsoon session) as the committee has asked for more time to come up with legislative proposals."

While announcing the 2004-05 Budget, Chidambaram had said that FDI cap would be raised from 26 to 49 per cent in the insurance sector, from 40 to 49 per cent in civil aviation and from 49 to 74 per cent in telecom.

In civil aviation, Government already has raised FDI cap to 49 per cent and notification with regard to telecom sector is also expected shortly. The raising of FDI cap in insurance sector, however, requires amendment to Insurance Regulatory and Development Authority Act.

On allowing foreign players in pension sector, he said, "We are at the beginning of a curve which could become a crisis in years to come. We have to do pension reforms now."

That would involve foreign firms in pension sector but such companies would come in only as fund managers, he said.

He also gave a categorical assurance that withdrawals from savings made in instruments like PPF, EPF, life insurance and annuity funds will remain tax-free till the date the Government switches over to the new system.

"Nobody's current savings would be affected. Whatever model is adopted would only be prospective," he said.

On growth prospects, Chidambaram said the CMIE has "jumped the gun" by reducing the GDP forecast due to fears of monsoon not being normal this year.

"My watchword is be confident but be alert," he said, adding it was too early to panic at the pace of the monsoon.