Photo: R. V. Moorthy

BANKERS' ASSURANCE: Chairmen and Managing Directors of (from left) Punjab National Bank, Canara Bank and IDBI Bank, S.C. Gupta, M.B.N. Rao and V.P. Shetty at a meeting called by Finance Minister P. Chidambaram in New Delhi on Thursday.

NEW DELHI: Finance Minister P. Chidambaram on Thursday directed public sector banks to moderate the growth of credit to high-risk sectors such as commercial real estate and capital markets while holding the lending rates on home loans up to Rs.10 lakh to protect the interests of this section of borrowers.

At a meeting with chief executives of public sector banks here, Mr. Chidambaram advised them to ensure the availability of credit at ``correct prices'' to ``productive'' sectors but maintain caution on funding commercial real estate and stock purchases.

Speaking to newspersons after the meeting, Mr. Chidambaram said: ``We have advised banks that credit growth of about 30 per cent has to be moderated. Therefore, they have to rebalance their portfolios and moderate credit growth to what RBI calls high-risk sectors like commercial real estate, capital markets and systemically important NBFCs.''

The bank chairmen, Mr. Chidambaram said, had informed him that they had started rebalancing their portfolios in the second half of 2006-07 and would proceed with the debt in the first half of the current fiscal.

``We have impressed upon them [bank chairmen] that they have to rebalance their portfolio so that adequate credit at correct prices is available to productive sectors."

The PSU banks have also been warned against raising bulk deposits at high cost during February and March. Dubbing this kind of high-cost deposit build-up as a vicious circle, Mr. Chidambaram said: ``If banks raise bulk deposits at high cost in February and March this year, they will do it again in February and March next year.'' To stop this trend, the Indian Banks Association (IBA) would evolve guidelines so that banks do not compete with each other on raising bulk deposits at high cost.

Turning to bank lending to the needy sections of society, the Minister said five communities had been identified as minorities with 103 districts as minority dominated. ``We have urged banks to open new branches in these districts and also urged them to monitor flow of credit to minorities," he said, while noting that district plans would place special emphasis on lending to this section.

Mr. Chidambaram agreed that the banks would have to finance the infrastructure sector. Pointing out that the India Infrastructure Finance Company Ltd. had approved loans worth Rs. 8,810 crore in 47 projects last fiscal, he said: ``Banks have been urged, advised to form consortiums and lend to infrastructure in association with IIFCL...You will find that more loans would be sanctioned in 2007-08.''

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