Finance Minister P. Chidmbaram Friday asked banks to step up loans and advances to all sections of the society, especially farmers, self-help groups, small and medium enterprises and students to drive GDP growth.

Inaugurating the centenary celebrations of Canara Bank here, Chidambaram said the Indian economy could no longer afford to grow at the Hindu growth rate of three-four percent if the country had to achieve GDP (gross domestic product) growth of seven-eight percent a year.

"Though India is next only to China in economic growth among developing nations, we need to achieve a GDP growth of eight-nine percent to not only overtake China but also become an economic super power," he said.

"This kind of ambitious growth will be possible only when banks lend much more than they are doing now. Currently, the banking sector finances only 37 percent of the country's GDP, which is about $700 billion, with the reminder coming through non-banking finance and institution finance. This hampers growth."

In this context, he said in most developed countries, bank finance accounts for about 60-70 percent of GDP. In countries like Singapore and Malaysia, it accounts for about 130-140 percent of GDP.

"To grow at a faster rate, bank finance must grow and drive GDP growth. Lending is a bank's dharma. It is lending that brings deposits and customers to banks," Chidambaram said.

"The first and primary target of lending should be to the farm sector, followed by micro-financing of self help groups, women's organisations, students, small and medium enterprises, general businesses and trade and services."