NEW DELHI: All public sector banks on Monday agreed to comply with Finance Minister P. Chidambaram's directive not to raise the interest rate on home loans as also agreed to rejig their loan portfolio to contain credit growth in certain sectors.

Speaking to newspersons after a meeting with the chiefs of PSU banks to review their quarterly performance, Mr. Chidambaram said: "I have asked the banks to hold [the] interest rate on home loans at the current rate... I am glad all public sector banks have agreed to hold [the] interest rate on home loans at the current rate.''

At present, the interest rates on home loans are around 9-10 per cent (floating) and 11 per cent (fixed) although the rates and tenure vary across banks.

Mr. Chidambaram noted that following the recent monetary steps announced by the Reserve Bank of India (RBI), the banks had also been told to "rebalance" their loans to comply with the increased provisioning of capital for loans on credit card as also for buying shares, commercial real estate and borrowings from non-banking finance companies (NBFCs).

As for bank credit to the farm sector, Mr. Chidambaram said the Government was confident of exceeding the lending target of Rs. 1,75,000 crore set for 2006-07. Bank loans to the farm sector during the third quarter this fiscal, he said, had increased by 28.4 per cent with the total outstanding pegged at Rs. 1,49,343 crore.

On education loans, Mr. Chidambaram said banks had been told to narrow down the variations in the interest rate among various banks. The outstanding in this segment totalled Rs. 12,337 crore, which worked out to a growth of 31 per cent, he said.

Mr. Chidambaram denied that a high rate of default among home loan borrowers was leading to an increase in the non-performing assets (NPA) of banks. The banks, he said, had reported nearly 99 per cent recovery in the home loans segment which showed that there were only a few fraudulent customers. However, the credit cards segment, he said, had shown an increase in the NPA level of banks and he hoped that this too, would moderate with the new provisions in place.

The PSU banks, Mr. Chidambaram pointed out, had given an assurance to reduce their NPAs to less than 1.32 per cent of the total advances while noting that the banks had ample liquidity with some progress achieved in rebalancing their loan portfolio.

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