NEW DELHI: Finance Minister Pranab Mukherjee has cautioned all staterun banks and financial institutions on the deterioriating asset quality. "They (banks) should exert themselves to devise suitable strategies for containing and rolling back non-performing assets ," he said.
Mr Mukherjee on Friday did the annual review of the performance of public sector banks and financial institutions. The finance minister also assured the private sector of enough liquidity in the market and said that the government, which has Rs 4.17 lakh crore borrowing plans for 2011-12 , does not intend to elbow them out. "So far the borrowing programme is concerned, always we match it in such a way that the others in the market of borrowing are not elbowed out," he said.
Mr Mukherjee expressed his satisfaction on the 22.44% credit growth recorded by the staterun banks in 2010-11 but cautioned on the moderation in the last quarter. Credit growth has moderated largely because of the hike in interest rates due to the tight monetary policy regime followed by the RBI since March 2010.
Further banks have been more cautious in lending to certain sector such as real estate and power due to rising bad loans in these sectors. RV Verma, chairman of National Housing Bank , which is also the sectoral regulator for all housing finance companies, said that due diligence is very necessary while advancing credit to commercial real estate sector as high interest regime is pushing up project costs and hence there is greater chances of default. Mr Mukherjee expressed confidence in the resilience of Indian banks and advised banks' chairmen to undertake a comprehensive capital planning exercise, particularly in view of the Basel III capital adequacy benchmarks.
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