FM asks PSBs not to raise interest on home loans

New Delhi, Feb 5 (UNI) Finance Minister P Chidambaram today asked chiefs of public-sector banks not to raise interest rates on home loans and made out a case for moderating rapidly growing credit creation.

However, the minister did not raise any objection on banks raising rates on other personal products, such as credit cards.

Mr Chidambaram met chiefs of state-run banks to ensure adequate credit flow to productive sectors like infrastructure, agriculture and industry after the Central Bank raised the repo rate by 25 basis points.

The RBI in its recent Review of the Annual Credit Policy had raised the risk weightage for loans to the real estate sector, but refrained from doing so for the housing sector.

While credit to the real estate sector grew by more than a 100 per cent, lending to the home loan sector grew by more than 50 per cent.

This unusual credit attracted attention and there are fears that a property bubble is building up. However, the government is keen that in a year laced with crucial state Assembly elections, middle class consumers do not face any rough weather on the home loan front.

Bankers say that the boom in house constration is good for the growth of the economy and the fears about the bubble was unfounded at present.

The government asked the banks to re-balance their loan portfolios and moderate credit growth to some sectors of the economy.

UNI