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The rise in capital inflows driven by low interest in advanced economies, into India is not a threat to the stability of financial system, reported the Economic Times quoting Finance Secretary Ashok Chawla.
Chawla said that the country is prepared for a surge in inflows and added that the current scenario is not as bad as it was in 2007, when the government and central bank had to intervene to restrict excess inflows then.
Chawla said that India received inflows of $14 billion in the first half of the fiscal as anticipated. He said more inflows are expected in the current fiscal year and added that it would not be a problem to the system.
C Rangarajan, the head of the Prime Minister's Economic Advisory Council, too opined that there are no concerns and, as such, no need for change in policies at present.
The government restricted external commercial borrowings and curbed usage of participatory notes used to invest in stock market to control inflow of foreign capital in 2007-08. The norms were later relaxed.
The finance ministry and RBI would decide in December whether to continue with the current norms. Overseas borrowings for development of integrated townships are also to be considered after December 31, 2009.
Chawla said that the credit off-take from banks are yet to return to normalcy. He said that it is at a 12-year low as banking system is flush with liquidity and are placing close to Rs.1.5-lakh crore with the apex bank overnight through reverse repo window.
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