finance minister Pranab Mukherjee has cautioned all state run banks and financial institutions on the downward trend of asset quality. "They (banks) should to exert themselves to devise suitable strategies for containing and rolling back non performing assets," he said. Muk-herjee on Friday, took the annual review of the performance of public sector banks and financial institutions.

He also assured the private sector of enough liquidity in the market and said that the government, which has Rs 4.17 lakh crore borrowing plans in 2011-12, does not intend to elbow them out.

"So far the borrowing programme is concerned, always we match it in such a way that the others in the market of borrowing are not el-bowed out," he said. In the Budget 2011-12, the government had an-nounced a gross borrowing of Rs 4.17 lakh crore from the market, lower than Rs 4.47 lakh crore during last fiscal. Of this, the govern-ment has announced to borrow 60% or Rs 2.5 lakh crore in the first half of the fiscal.

Mukherjee expressed his satisfaction on the 22.44% credit growth re-corded by the state run banks in 2010-11 but cautioned on the mod-eration in the last quarter. Credit growth has moderated largely be-cause of the hike in interest rates due to the tight monetary policy re-gime followed by RBI since March 2010.

Further banks have been more cautious in lending to certain sector such as real estate and power due to rising bad loans in these sectors. SBI's chairman Pratip Chaudhuri said on the sidelines of the review meeting that the bank will not finance real estate projects which are being carried out in dispute areas.

RV Verma, chairman of National Housing Bank, which is also the sec-toral regulator for all housing finance companies said that due dili-gence is very necessary while advancing credit to commercial real es-tate sector as high interest regime is pushing up project costs and hence greater chances of default.

Mukherjee expressed confidence in the resilience of Indian banks and said advised banks' chairman to undertake a comprehensive capital planning exercise, particularly in view of the Basel III capital adequacy benchmarks.

The finance minister asked banks to pursue financial inclusion through the business correspondent (BC) model and stressed that there should be transactions in the no-frill accounts. He also asked banks should also support their sponsored Regional Rural Banks.