Capital flows in line with expectations: RBI Governor

By | December 7, 2009

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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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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