Finance Minister P Chidambaram asked banks on Monday to even out their loan portfolios to ensure adequate credit to productive sectors, while prescribing deposit mobilisation to head-off liquidity crunch.
"I advise banks to re-balance their portfolios to ensure productive sectors are not denied credit... otherwise there will be crunch of liquidity... re-balancing is a pre-emptive step," he told reporters after a meeting with the chairmen of PSU Banks in New Delhi.
He said he had also asked the Indian Banks Association to look into how banks can raise deposits. If there are problems, both RBI as well as finance ministry would address them by taking policy steps.
Chidambaram's remarks follows RBI's busy season credit policy, which flagged off certain concerns about more-than- deserved credit growth in sectors like housing, commercial real estates and personal loans -- indicating there were signs of overheating in the economy.
The finance minister had himself, last week, admitted to signs of overheating in the economy.
"Some sectors such as housing and credit cards are witnessing very high credit growth," he had said, while asking banks to moderate their lending to such sectors.
While banks' credit has been growing at 30 per cent, the deposits were increasing by 20 per cent leading to a mismatch. Sectors such as housing, commercial real estate and personal loans have witnessed nearly 100 per cent growth.
It was in this context that Chidambaram wanted banks to re-balance portfolios in sectors identified by the Reserve Bank to ensure that productive sectors and agriculture are not denied credit so as to maintain the high growth momentum.
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