RBI fears for portfolio inflows, wants more FDI

Bangalore: The Reserve Bank of India on Thursday pitched for increased foreign direct investment into the country, even as it expressed apprehension over the quality of portfolio inflows.

RBI Deputy Governor Shyamala Gopinath said India has been able to absorb capital inflows because it has a current account deficit.

"But we have expressed apprehension on the quality of inflows in terms of portfolio inflows," she told reporters on the sidelines of a function here. "But as we see today, we are not seeing too much volatility in that sense. But we would want more of FDI to come in so that quality of the flows do alter," she added.

Gopinath also said the RBI would issue draft guidelines on new banking licences in the next couple of weeks.

"We are in consultation with the government (in regard to draft guidelines). There is no tussle with the government as such," she said in response to a question, adding that the RBI and the government converge on many issues vis-a-vis these guidelines.

When asked about SKS Microfinance "struggling" with Andhra Pradesh government norms, Gopinath said the RBI expects MFIs (Microfinance Institutions) to be in full compliance with its regulations.

She said the RBI hopes the Andhra Pradesh government takes a relook at its (Andhra government`s) regulations to ensure that MFIs are able to function in that state.

Gopinath also said rising commodity prices, particularly oil and gas, would add to the inflationary pressures, adding that the other factor driving inflation is that the price rise has not been factored in the administrative price of items like fuel.

"So, yes, we would be impacted if commodity prices go up substantially," she added.