Friday, November 18 2005 19:55 Hrs (IST) - World Time -

New Delhi: Amid upward pressure on rates and squeeze on liquidity, Finance Minister P Chidambaram today (Nov 18, 2005) said there will be no hike in interest rates particularly on loans given for productive purposes this fiscal.

Expecting mergers and acquisitions among banks to take place 'sooner than later', he asked Reserve Bank to come up with guidelines on Tier-I, Tier-II and Tier-III capital to enable banks to mop up Rs 60,000 crore in the next 5-6 years.

After a marathon review meeting with 28 PSU bank chairmen, Chidambaram set a goal of keeping net non-performing assets below 2 per cent of loan advances and cautioned banks to prevent fresh slippages.

On interest rates, he said, "by and large, banks will be able to maintain the current interest rate regime for productive purposes till March 2006."

He also did not see rates going up for home loans in the near future as increase in risk weightage by Reserve Bank would take care of the upward pressure.

Elaborating on what he meant by productive purposes, he said loans given for plant, machinery, construction and import capital goods needed for production will not become costlier.

There was an investment boom in the country and the government wants to momentum to be maintained to ensure a higher GDP growth.

Agreeing with the finance minister, bankers said short-term rates will remain 'stable' but there was an upward pressure.

Country's biggest lender State Bank of India chairman A K Purwar said, "in the short term, there is pressure in the interest rates".