Dr D. Subbarao, RBI Governor has stated that the capital inflows into the country are in line with the Reserve Bank of India’s expectations and there is no cause for concern of a possible build-up of asset price bubbles.
Speaking to reporters after the RBI board meeting, he said, “There are no concerns about inflows building an asset bubble. If there is too much liquidity then it has a potential for increasing the asset prices but every increase in asset price might not necessarily lead to an asset price bubble.” He mentioned that the central bank would take price and quality-based controls on debt flows whenever required, adding, “The capital inflows are in line with our requirements at present. If and when there is excess of capital flows, we will have to respond to that situation.”
When addressed with a question on the exorbitant rates of interest charged by the microfinance institutions (MFIs), Dr Subbarao said, “According to our perspective the interest rate of 24-36 per cent charged by MFIs is certainly higher than the BPLR. MFIs should therefore look at bringing down the interest rates after taking into consideration their cost of funds.” However he added that regulating interest rates charged by MFIs was not within the RBI‘s domain.
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