Portfolio inflows are a concern: RBI

The Reserve Bank of India (RBI) today pitched for more foreign direct investment (FDI) into the country, even as it expressed apprehension over the quality of portfolio inflows.

RBI Deputy Governor Shyamala Gopinath said India had been able to absorb capital inflows because it had a current account deficit. “But we have expressed apprehension on the quality of portfolio inflows,” she told reporters. “But today, we do not see too much volatility in that sense. We would want more FDI to come in, so that the quality of inflows alter,” she said.

Gopinath also said RBI would issue the draft guidelines on new banking licences in a couple of weeks. “We are in talks (about draft guidelines) with the government. There is no tussle with the government as such,” she said, adding RBI and the government share similar views on these guidelines.

When asked what she thought of SKS Microfinance's struggle with the Andhra Pradesh government norms, Gopinath said RBI expected microfinance institutions (MFIs) to comply with the regulations. She said RBI hoped the Andhra Pradesh government would review its regulations and ensure that MFIs were able to function in that state.

Gopinath also said rising commodity prices, particularly those of oil and gas, would add to inflationary pressures, adding the other factor driving inflation was that the price rise had not been factored in the administrative price of items like fuel. “So, yes, we would be impacted if commodity prices go up substantially,” she said.