New Delhi: Finance Ministry and Reserve Bank sought to play down their differences in perception on interest rates, saying the direction from North Block was only to ensure that productive sectors are not starved of liquidity at a time when the economy was on high growth path.
"There may be slight differences in perception on interest rates but it does not mean that that there is a rift between Finance Ministry and Reserve Bank," senior Finance Ministry
officials said on Thursday.
The officials added, the letter written by North Block to PSU banks to seek their board's approval for hike in prime lending rates was aimed at ensuring that there is no starving of credit for productive purposes.
Reserve Bank too felt it was not proper to read too much into the absence of its nominees from the recent board meetings of Bank of Baroda, Andhra Bank and Oriental Bank of Commerce, which reviewed hike in interest rates.
The growth momentum should not be dampened through any slowdown of credit flow, they said.
RBI, on the other hand, is of the view that inflation should be kept under control by sucking out excess liquidity from the system, sources said.
As such, the central bank is not averse to some adjustments in interest rates, they added.
The Finance Ministry has based its view in the backdrop of 1997 East Asian currency meltdown during which SouthEast Asian Countries hiked interest rates as a measure to deal with liquidity situation dampening the booming investments in those countries at that point of time.
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