FM Sitharaman Calls for Lower Loan Rates to Boost Growth

Finance Minister Nirmala Sitharaman didn’t hold back on Monday when she called out the “stressful” interest rates we’re currently seeing. Speaking at an event hosted by the State Bank of India (SBI), she urged banks to consider making loans more affordable—something she believes could give India’s industries the push they need to expand and build new infrastructure. Lower lending rates, she explained, are key to realizing India’s vision for "Viksit Bharat".

“When you think about India’s growth ambitions, you can’t ignore how much high borrowing costs weigh on businesses,” she said. “Industries need to expand and upgrade their capacity, and for that, banks must step up with more affordable interest rates.”

Commerce Minister Piyush Goyal shared a similar viewpoint last week, urging the Reserve Bank of India (RBI) to reduce rates to boost the economy. He even suggested that food prices should play a smaller role when shaping monetary policy.

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But here’s the catch, commercial banks base their lending rates on the RBI’s policies, which means interest rates are often linked to the repo rate. Inflation, however, has been a dampener lately. In October, consumer price inflation hit 6.2%, going beyond the RBI’s comfort zone of 6%. Naturally, this has dampened hopes for a rate cut anytime soon.

Sitharaman, however, was quick to point out that inflation is mainly driven by a handful of perishable items, while core inflation (the kind that excludes volatile items like food) is still at a manageable 3-4%. While she stayed away from debating whether food prices should influence monetary policy, she did stress that the government is actively tackling supply-side challenges for essentials like pulses and edible oils.

She also spoke about India’s recurring supply chain hiccups, blaming them on cyclical factors. To tackle this, the government is focusing on better storage infrastructure to reduce price volatility. Her message? Inflation is under control, and measures are in place to cushion its effects on everyday citizens.

Despite talk of a global economic slowdown, Sitharaman assured that there’s no need to panic. The government, she said, is fully aware of the challenges, both local and international. “Let’s not worry unnecessarily,” she added, pointing to strong economic activity as a sign that things are still on track.

On fiscal policy, she clarified that economic growth remains the top priority—even amid concerns over fiscal consolidation. She also made a case for a credit rating upgrade, urging agencies to reconsider India’s current standing.

Sitharaman didn’t stop there. Turning her attention to the banking sector, she called on banks to focus on their core job: lending. She criticized the "misselling" of insurance products, which she said indirectly drives up borrowing costs for customers. Instead, she called for greater transparency and an ethical approach, emphasizing that trust is built by offering personalized services—not one-size-fits-all solutions.

While acknowledging banks’ efforts to improve insurance penetration, she cautioned against pushing unnecessary products onto customers. “It’s about understanding individual needs,” she said.

She also set bold lending goals for micro, small, and medium enterprises (MSMEs): ₹5.75 lakh crore for FY25, ₹6.12 lakh crore for FY26, and ₹7 lakh crore for FY27. These targets reflect her commitment to supporting smaller businesses as a driver of India’s economy.

Looking ahead, Sitharaman wants banks to go beyond just helping people open basic accounts. The future, she said, lies in empowering customers by turning their savings into investments, offering insurance, and even providing wealth management services.

On the global stage, Sitharaman voiced concerns about countries backtracking on climate negotiations. She called this trend “worrying” and stressed that climate change is a universal challenge. Taking a swipe at unilateral actions like the European Union’s recent measures, she pushed for more inclusive, global agreements.