"Government will take a realistic view on scaling down credit target of PSU banks for this fiscal if the banks feel that targets are not achievable," financial services secretary Vinod Rai said.

Public sector banks had projected a 20-25 per cent growth in credit in fiscal 2007-08. Major banks, including the State Bank of India and Punjab National Bank, have already reported slowdown in loan disbursals.

PNB has asked the government to revise its business target downward by 7-9 per cent to 16-17 per cent since the agreed targets are not achievable.

As per RBI''s own admission, non-food credit growth has declined to Rs63,258 crore as of October 5 against Rs1,05,437 crore during the same period last year.

Bankers fear a further slow-down in credit growth if RBI decides to hike their credit reserve ratio in its half-yearly review of monetary policy due on October 30.

They expect the RBI to raise CRR limit by at least 25 basis points to manage the liquidity in the market.

Meanwhile, former RBI governor Bimal Jalan has said the Reserve Bank should not do anything that might make the economic fundamentals of the country uncomfortable.

"There is an inflow of funds and RBI has to reconcile different objectives... but nothing should be done to make things uncomfortable," Jalan said on the sidelines of a conference on micro-finance.

The RBI is facing a tough task of keeping the economic growth going while keeping inflationary pressures under control. Foreign institutional investors (FIIs) have so far this year pumped over Rs60,500 crore into the country''s equity markets, which are on their peaks, he said.

The rupee is trading below the Rs40 a dollar mark, putting pressure on the margins of exporters.

A slowdown in inflation to 3.42 per cent for the week ended September 22 has, meanwhile, fuelled expectations of a cut in interest rate by the central bank during its half-yearly monetary policy review.
also see : General reports on Economy