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The Finance Minister, Mr Pranab Mukherjee has advised public sector banks (PSBs) to keep "strong vigil" on their asset quality in the current environment of high interest rates.
The commitment to moderate levels of inflation has led to higher interest rates, Mr Mukherjee said at the 106th Foundation Day celebrations of Bank of India here on Wednesday.
The inflation challenge faced by India is partly an offshoot of the policy response in the developed countries to the financial crisis, he said.
To tame inflation that is running close to double digit, the central bank has raised interest rates 11 times in the last 18 months. A loose monetary policy adopted by the developed world in the wake of global financial crisis has led to surge in capital flows into developing countries like India, fuelling inflation here.
"These are turbulent times and we should watch every step we take. But this should not prevent us from taking bold and innovative steps", Mr Mukherjee noted.
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