Addressing a video conference on the third quarter review of monetary policy 2008-09, he said the atmosphere in the state was conducive to lending to industrial units.

The RBI Governor admitted that banks had their own constraints and were free to take credit decisions on their own. In this situation, they could only be convinced to cut lending rates up to a certain point because they were also to look after the non performing assets ratio.

He said there was ample liquidity in the system, but admitted that NPAs were going to be a problem for banks in times to come, which will be painful.

But all this would not come in the way of lending decisions of the banks to industrialists wanting to invest in Gujarat to fulfil their investment commitments to the tune of Rs 12 lakh crore, he said, adding that the investors' summit was a success and industries signing MoUs deserved financial support.

He said there was further scope for banks to cut lending rates, as there were some banks that had not reduced interest rates.