Indian banks offer cheap loans for motorcycles and home appliances

Intend to stimulate demand for consumer items.

The move is expected to boost the production of consumer durables items such as two-wheelers motorcycles, refrigerators, washing machines and TVs, which have been hit by high interest rates and inflation. The sector has failed to register growth since last November.

Indian banks will offer the cheaper loans to try to pull the economy out of the worst slowdown in a decade, said Finance Minister P. Chidambaram. He said banks will receive additional capital to carry out the plan..

The move comes at a time when persistently high inflation plus with shrinking employment opportunities in a slowing economy have gutted consumer demand.

Growth in consumer spending fell to 1.6% on-year in the quarter through June from 4.3% a year earlier. This helped pull down economic growth for the quarter to a four year low of 4.4%.

The cheap loans are expected to bring relief to consumers, especially the middle class and to give a boost to more capacity, employment and production.