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May 4, 2002 | 1540 IST
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Sinha rules out any govt role in interest fixation

Finance Minister Yashwant Sinha. Photo: ReutersRuling out any government role in interest rate fixation, Finance Minister Yashwant Sinha on Saturday said the endeavour would be to keep inflation levels within control. "Low inflation warrants softer interest rate regime. We want the economy to move in that direction," Sinha said.

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 that 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.

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