Govt., India Inc. urge banks to provide cheaper loans

With India's inflation rate hovering at a near-record low of 0.31 percent, India's Prime Minister Manmohan Singh has taken the leading role in urging banks to provide cheaper loans.

"With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates. Domestic credit flow for productive needs has to be definitely maintained at reasonable cost," Singh said.

"While public sector banks have reduced the prime lending rates in the last three months between 150 and 200 basis points (bps), other scheduled commercial banks are yet to respond in equal measure," he said.

Singh is not alone in favoring lower interest rates.

Last week, Cabinet Secretary K.M. Chandrasekhar held a meeting with top bankers to review the credit situation and urged the latter to ease interest rates further.