Hungary's economy minister Tuesday played down fears that the government's debt relief plan for people with mortgages taken out in strong currencies like the Swiss franc will wreak havoc for the banking industry.

Prime Minister Viktor Orban presented a proposal to parliament Monday that would allow people to pay off such mortgages at a fixed exchange rate well below the market rate. They would have to do so in one lump sum.

Investors immediately voiced fears banks would suffer serious losses because many homeowners could take advantage of the deal at depressed prices.

But Economy Minister Gyorgy Matolcsy said the government doesn't expect banks to be flooded with requests because the plan doesn't require banks to offer people loans in forints. His comments were carried by state news agency MTI.

Most people would presumably have to borrow the outstanding principal on their mortgages.

Before the global economic crisis, many Hungarians took out mortgages in foreign currencies because the rates were more attractive. Today, the large majority of Hungarian households have mortgages in Swiss francs or euros. Their debt burden has increased because those currencies have strengthened against the forint.

Asked to explain what Orban meant to say in his speech Monday by the state "standing behind" OTP Bank Nyrt. (OTP.BU) and mortgage bank FHB Nyrt. (FHB.BU), Matolcsy said "if they're in need of help, we'll provide it."

Matolcsy also confirmed he had received a letter from Austrian Finance Minister Maria Fekter protesting the plan and was answering it.

Several Austrian banks have subsidiaries in Hungary, generally with large foreign currency retail loan portfolios.

-By Veronika Gulyas, Dow Jones Newswires; +361-267-0623; veronika.gulyas@dowjones.com