With bankers apprehending a rise in their non-performing assets over the next six months this year, President Pratibha Devisingh Patil on Saturday sounded a note of caution on “unbridled” credit growth so as to pre-empt bad debts even as loans must be ensured to productive sectors of the economy.

In her address after releasing a commemorative postage stamp at a function to mark the Platinum Jubilee celebrations of the Reserve Bank of India (RBI) here, Ms. Patil said: “If there is one lesson that can be drawn from this [global financial] crisis is that there cannot be unbridled extension of credit. The Reserve Bank must continuously ensure that banks have proper guidelines for risk management”.

Alongside, expressing confidence that the Indian economy would grow by over seven per cent this fiscal, the President said: “While indiscriminate grant of credit must be avoided, credit policies should definitely not deny finance for productive enterprises. There is a need to speed up development and infrastructure projects in the country and to ensure that bank credit is available to all sectors, sections and units across the scale.” In this regard, Ms. Patil sought to make out a case for extending loans to women self-help groups (SHGs), especially to those below the poverty line, at an annual interest rate of not more than four per cent. “The RBI should consider evolving a mechanism under which women SHGs, particularly those comprising the BPL category, are provided credit at an interest rate not exceeding four per cent per annum,” she said.

To this, even as RBI Governor D. Subbarao’s response was “we have to examine the issue,” Deputy Governor K.C. Chakrabarty explained to reporters that it is not the apex bank that lends to SHGs. Since it is the banks which give loans to them, only they will be able to take that decision. However, there could be a system for a small group of people to get loans at concessional rate, but there could not be a generalised system, he said.

Lauding RBI’s role through 75 years of its existence, the President said that the apex bank acted in a highly responsible manner and contributed to providing support to the nation’s economy both during critical and relatively normal times. During the recent crisis, it demonstrated its experience of regulating monetary flows of the nation and has lent to it “high stature and given it deep maturity and perspective to deal with a range of complex economic issues”.

“The Reserve Bank has been aligning the banking system to respond to the needs and priorities of our development agenda. At this stage, as part of their increased social responsibility, we need a greater involvement of the banking system in the ongoing national development programmes,” she said.

Speaking on the occasion, Finance Minster Pranab Mukherjee commended the RBI’s role in battling the recent financial crisis. By responding to the evolving situation quickly, effectively and responsibly, it had helped the country in mitigating the impact of the crisis, he said.

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