CREDIT REVIEW: Union Finance Minister P. Chidambaram being welcomed by S. C. Gupta (extreme left), Chairman, Punjab National Bank, M. B. N. Rao (second from left), Chairman and Managing Director, Canara Bank, and Y. B. Shetty, Chairman and Managing Director, IDBI, at a meeting with chief executives of public sector banks in New Delhi on Monday. — PHOTO: KAMAL NARANG

NEW DELHI: The Finance Minister, P. Chidambaram, on Monday asked public sector banks (PSBs) to re-balance their loan portfolios to ensure adequate credit to productive sectors while mobilising higher deposits to ward off a liquidity crunch.

Briefing newspersons here after his meeting with the public sector bank chiefs, Mr Chidambaram said: "I advised banks to re-balance their portfolios to ensure [that] productive sectors are not denied credit...otherwise there will be crunch of liquidity... re-balancing is a pre-emptive step.''

Alongside, the Indian Banks Association (IBA) has been told to look into ways and means of raising deposits. In case of problems in this regard, the Reserve Bank as well as the Finance Ministry would address them by taking the necessary policy steps, he said.

The Finance Minister's advice to the PSB chiefs came in the wake of the RBI's busy season credit policy which raised certain concerns about more-than-deserved credit growth in certain sectors such as housing, commercial real estates and personal loans. Mr. Chidambaram had himself admitted that there were signals of overheating in the economy. Mr. Chidambaram pointed out that to sustain credit growth of 30 per cent, it was imperative that deposits also rose at least by 25-30 per cent. As of now, there was no liquidity crunch, but in the long run, "banks have to mobilise deposits and re-balance their credit portfolios,'' he said.

To a query as to whether he wanted the PSBs to raise deposit rates, Mr Chidambaram noted that it was for the individual banks to decide for themselves. However, to stay in the competition, he said, it was imperative for the PSBs to keep pace with the private sector banks.

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