New Delhi, June 10 Finance Minister Pranab Mukherjee on Wednesday asked banks to cut interest rates and provide affordable credit to industry to spur economic activity.

Addressing chief executives of public sector banks here, Mukherjee said, "As a financial intermediary the banks have to stand by to provide credit at reasonable rates."

"The reduction in key rates by the Reserve Bank is not adequately reflected in the reduction of Benchmark Prime Lending Rates (BPLR) of banks," he added.

He said that the overall business of the public sector banks grew by about 26 per cent at a time when the credit growth of both the private sector banks and foreign banks was declining and resources from non-bank financial sources were contracting.

'Net profit of the public sector banks has showed a robust growth of 27.0 per cent in 2008-09. As the main shareholder of the public sector banks, Government has already announced that it wants to recapitalise public sector banks to enable them to achieve CRAR of 12 per cent," he added.

On the issue of merger of public sector banks, Mukherjee said the government has always maintained that initiatives for consolidation in the banking sector have to come from the management of the banks themselves.

Hoping that the impact of various pro-growth measures would help to turn around the economy soon, Mukherjee said, "As a result of the various measures announced by the Government and RBI, today we are looking at our economy with a lot of hope. The stock market also seems to be quite bullish.

"The last quarter GDP growth figure of 5.8 per cent and the annual growth of around 6.7 per cent for 2008-09, is a pointer towards this direction. Prime Lending Rates of the banks have come down to the range of 12.00-12.25 per cent as against 13.75-14.25 per cent six months back," he added. (ANI)