Kolkata: There is no concern of capital inflows building asset bubbles in the country as of now, the Reserve Bank of India (RBI) governor D. Subbarao said on Thursday, a day after the authority had tightened foreign borrowings by companies.
“At this time capital flows are in line with our requirements. If and when there is excess of capital flows, we will have to respond to that situation,” Subbarao said.
Eye on future: Reserve Bank of India governor D. Subbarao. PTI
He said the inflows were roughly in line with India’s current account deficit. “We cannot call it a capital surge like what happened in 2006-08,” he said.
An economic adviser to the Prime Minister has said India could absorb inflows of up to $100 billion (Rs4.7 trillion) in the current fiscal year, well above his expectations of inflows worth $57-60 billion.
RBI had said it would withdraw from 1 January some concessions on external commercial borrowings (ECBs) for Indian firms introduced during the global credit crisis, although it also eased rules for the infrastructure and telecom sectors.
“Yesterday (on Wednesday) we reversed the easing we had done on the ECB policy,” Subbarao said. “That’s our policy for now. I cannot really speculate on what, if any, we will do,” he said.
The limits on overseas borrowings were relaxed during the global financial crisis as Indian firms were not able to raise ECBs at the spread the central bank prescribed, deputy governor Shyamala Gopinath said.
“We simply reverted to the spreads that existed prior to the dispensation. This is a part of capital account management framework. It does not indicate any capital control,” she said, adding the markets have now normalized.