Finance minister Pranab Mukherjee on Friday asked the banks to scale down their advances to risky businesses to protect their asset quality.
"The non-performing assets (NPA) have grown faster than the credit. There is a need for banks to tighten their belt," Mukherjee said,
inaugurating the platinum jubilee celebrations of the Indian Overseas Bank (IOB).
According to the Reserve Bank of India's latest Financial Stability Report, the year-on-year growth rate of NPAs stood at 30.5% and slippages (fresh accretion to NPAs) grew at 92.8% as of September 2011, with the priority sector, retail, real estate and infrastructure being major contributors.
He asked the banks to tread carefully as the sector is confronted with risks of global slowdown and market volatility.
Mukherjee said the Basel III norms would be implemented in India from 2013 onwards so as to bring the Indian banks on par with global standards.
Urging the banks to go for special drive for financial inclusion of the poor, Mukherjee said the exclusion of these people impacted social equity and economic growth.
He said the government would soon introduce an electronic payment system for direct credit of subsidies to the beneficiaries which would apart from ushering in transparency would speed up the subsidy payments.
Later, inaugurating Indian Bank's new corporate office, Mukherjee said the government is committed to adequately capitalise all the public sector banks so that they could compete with the international banks.