Loans Expert

NEW DELHI : Following up on RBI’s anti-inflation initiatives, the finance ministry may ask public sector banks to moderate credit disbursal for personal loans so that productive sectors could get more money supply.

The ministry wants banks to be more prudent when it comes to loans which do not affect country’s growth directly.

A message to this effect is likely to be conveyed by finance minister P Chidambaram to bankers. The finance minister usually meets bankers within days of the credit policy review.

Giving an indication of the shape of things to come, the finance ministry said on Tuesday that banks should take “prudent” decisions while allocating credit. In a statement issued here, the ministry said that “prudent” allocation of credit by banks would help in making credit available to productive sectors.

“This means that we would have to put a check on personal and retail loans,” said a banker.

The finance ministry said that steps taken by country’s central bank would help in moderating inflation which is now hovering close to 12%. The RBI has raised the repo rate by 50 basis points and the cash reserved ratio (CRR) by 25 basis points, taking both of them to 9%.

“Government expects that the measures taken by RBI, in continuation with measures already taken over the last two months, will help in moderating and containing inflation,” the finance ministry stated.

Inflation is presently ruling at 11.89%, much above the RBI’s comfort level of 5%. RBI expects that the monetary measures would bring inflation down to 7% by March next year.

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