State-run banks asked to rebalance portfolios

To prevent productive sectors of the economy from being denied credit, a rebalancing is urgently required.

india Updated: Nov 06, 2006 17:53 IST

India's state-run banks were Monday asked to find more ways to increase deposits and rebalance their loan portfolios to meet the growth in credit demand expected in the ensuing months.

"I have asked the banks to rebalance their portfolios," Chidambaram said after meeting the chief executives of state-run commercial banks here - barely a week after the Reserve Bank of India (RBI) reviewed its monetary policy for this fiscal.

"We must ensure the productive sectors of the economy are not denied credit," he said, referring to the 30 per cent growth in credit exposures of banks but barely 20 per cent increase in deposits.

"If there are any issues to be addressed by the government, we will take care of that. But if there are issues to be addressed by Reserve Bank of India, I would request that it is addressed," Chidambaram said.

Endorsing the concerns expressed by the central bank, the finance minister said loans to India's realty sector and to individuals was witnessing excessive growth. A rebalancing, therefore, was necessary, he added.

"Available information points to high growth in credit extended by banks to fast growing sectors such as housing, commercial real estate and retail loans," the Reserve Bank of India had said last week in the monetary policy review.

"Against this background, it is critical to be watchful for early signs of overheating. An overheating economy is one that is growing rapidly and its productive capacity cannot keep up with resulting demand pressures."

First Published: Nov 06, 2006 17:53 IST