New Delhi, Nov. 6: Finance minister P. Chidambaram today asked banks to ratchet up their deposit growth rates to over 25 per cent, rejig their credit portfolios and keep shovelling loans to the productive sectors as concerns escalate about the overheating of some sections of the economy that is growing at over 8 per cent a year.

“Bankers need to re-balance their portfolios, try to moderate growth in some sectors and ensure credit needs of productive sectors, especially industry, services and agriculture, are not in any manner denied,” said Chidambaram after meeting the chairmen of state-owned banks.

“There will be concerns about liquidity if portfolios are not re-balanced and if deposits don’t grow.”

At a meeting, he also asked the Indian Banks’ Association (IBA) to determine how banks can raise deposits.

Deposits with banks rose only 21 per cent to Rs 22,510 crore for the half year ended September 30. In the same period, bank loans climbed 31 per cent to Rs 15,930 crore.

“Chidambaram’s concern is that there should be enough money in the banking system to help meet the credit need of companies and individuals and accelerate economic growth to as much as 10 per cent in the next three years from the average 8.2 per cent since 2003,” said Prakash P. Mallya, chairman and managing director of Vijaya Bank.

“Ideally bank deposits should grow at a rate of 25 to 26 per cent to be able to sustain the credit growth of 31 per cent,” he added.

Chidambaram’s comments give banks two options: either to go slow on credit or to mobilise deposits faster to finance high credit growth of 30 per cent.

“Mobilising funds through increase in deposits or utilising excess statutory liquidity ratio (SLR) or enhancing the capital base, will not be difficult for most public sector banks,” said Mallya.

“Though we may witness a rise in lending rates, specially in retail and real estate sectors, there will not be any decrease in credit disbursement,” he added.

The finance minister also said re-balancing of portfolios would ensure that credit to productive sectors of the economy like agriculture, industry and services is not denied.

Bankers said sectors such as real estate and personal loans have been witnessing excessive credit growth, which needs to be rationalised.

In the past year, consumer credit increased 44 per cent, with personal housing loans almost doubling. Retail lending has also gone up to 69 per cent of loans at ICICI Bank from 13 per cent in the last four-and-a-half years.

Last week, the RBI said excessive lending in housing, retail and real estate may lead to “overheating” in those areas and urged commercial banks to increase their exposure to industry and agriculture.