RBI pitches for increased FDI

The Reserve Bank of India (RBI) made a pitch for higher foreign direct investment (FDI) inflows into the country, even while expressing apprehension over the quality of portfolio inflows.

According to RBI deputy governor Shyamala Gopinath, India had been able to absorb capital inflows due to its  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.

She added that the apex bank 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.

In response to a query regarding  SKS Microfinance's struggle with the Andhra Pradesh government norms, she said the RBI expected microfinance institutions (MFIs) to comply with the regulations. She said RBI hoped the regulations would be reviewed by the Andhra Pradesh government to facilitate the functioning of MFIs in the state.

Gopinath added that increased commodity prices, especially of oil and gas, would add to inflationary pressures. She added that the other factor driving inflation, 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