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New Delhi: The government on Thursday asked state-run banks to step up lending to key sectors including manufacturing, and the power and road sectors, as the finance ministry looks to raise credit offtake to boost the investment cycle.

In a meeting attended by key finance ministry officials and heads of state-run banks and financial institutions, finance minister Arun Jaitley also urged banks to lend to the MSME (micro, small and medium enterprises) sector, which is key to employment generation.

Banks informed the government that credit offtake remained low because there was not much of demand for loans.

Non-food credit, an indicator of credit demand in the banking system, grew at only 8.6% to 56.5 trillion as of 19 September, as against 18.2% in the corresponding year-ago period.

“We have asked banks to go out there and lend without any fear. They should do proper appraisals of projects and provide loans to infrastructure projects," said a senior finance ministry official, who did not wish to be identified.

The official added that non-performing assets in the banking system are a legacy issue, and the situation will improve as the credit cycle picks up.

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