“If there is too much liquidity, it has the potential for asset price build-up,” he said, adding “however every asset price build-up need not necessarily result in a bubble.”
Subbarao averred that capital inflows were in line with the country’s requirement, and that the surge in capital flows was not like what happened between 2006-08. “If and when there is excess of capital flows, we will have to respond to that situation,” he added. Further, he exhorted the lead banks not to exhibit laxity over implementation of financial inclusion project, and stressed for its completion within the stipulated time ending March 31 2010.
Financial inclusion
Financial inclusion is the delivery of banking service at an affordable cost to vast section of the disadvantaged and low-income groups. At present, around 40 per cent of the population in India is in possession of bank accounts.
Subbarao said Reserve Bank is in the process of issuing a strict advice to lead banks to prepare a clear-cut roadmap by March 2010 for addressing financial inclusion, adding that if the performance of the banks are found wanting during the period, RBI will not hesitate to use other models to achieve its objective.
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