Finance Minister P Chidambaram on Monday asked state-owned banks not to raise interest rate on home loans and rebalance their loans to moderate credit growth to some sectors of the economy.

"I have asked the banks to hold interest rate on home loans at the current rate," he told reporters after a meeting to review quarterly performance of public sector banks.

"I am glad all public sector banks have agreed to hold interest rate on home loans at the current rate," he said. Home loans cost around 9-10 per cent (floating) and 11 per cent (fixed), with rates and tenure varying across banks.

Referring to recent monetary measures announced by the RBI, Chidambaram said banks have been asked to rebalance their loans to comply with the increased provisioning of capital by the bank regulator for loans on credit card, for buying shares, commercial real estate and borrowings from non-banking finance companies.

Expressing satisfaction with the performance of banks, he said bank advances have grown by 22.5 per cent during the third quarter this fiscal on year-on-year basis, and credit by 30.2 per cent.

The non-food bank credit has grown by 31.2 per cent, while lending to small and medium enterprises posted a growth of 28.4 per cent.

Referring to bank credit to the farm sector, Chidambaram said government is confident to cross the target of Rs 1,75,000 crore (Rs 1750 billion) lending to farm sector for this fiscal.

The bank credit to agriculture sector, he said, has increased by 28.4 per cent during the third quarter this fiscal and Rs 1,49,343 crore (Rs 1493.43 billion) were outstanding in the farm sector.

Referring to education loans, Chidambaram said banks have been asked to bring down difference in interest rate of different banks. Meanwhile, education loans increased to Rs 12,337 crore (Rs 123.37 billion), posting a growth of 31 per cent, he said.

Allaying fears of high rate of default among home loan customers, the Finance Minister said banks have reported around 99 per cent recovery in home loans. He said only a few fraudulent borrowers in home loan segment were causing an increase in non-performing assets.

Banks have also reported increase in NPA in the credit cards segment, he said, adding that after the new provisions this is likely to moderate. State-run banks have also assured the government that they would bring down their NPA below 1.32 per cent of total advances, he said, adding that they have ample liquidity and some progress has been made in rebalancing their portfolio as well.

The government has also taken up the issue of money laundering and annual information returns on bank cash transaction tax, as there have been delay by some banks, he added.