Market bubble won’t lead to big problem: RBI Guv

RBI Governor Urjit Patel said the stock market bubble should not "lead to a very major problem" while stressing the need for regulators to be cognizant of the risks going forward.

"There has already been a correction not only globally but in India and therefore in a way it underscores how capital markets can change direction…. So far neither globally nor in India have we felt that this bubble could lead to a very major problem," he said after the post-budget meeting of the RBI board with the finance minister on Saturday.

"However, as financial market regulators, both RBI and Sebi need to be cognizant of the risk going forward," said Patel. Benchmark Sensex has lost over 2,000 points since the presentation of the budget, which introduced the long-term capital gains tax.

Patel said one of the banks reduced its MCLR (marginal cost of funds-based lending rate) two days ago. "In terms of transmission, if you measure since the easing cycle started by the MPC (Monetary Policy Committee) and you compare the MCLR now, actually there has been good transmission."

Patel said monetary policy decisions need to be "forward-looking" and cannot be taken on the basis of day-to-day inflation rates. He also said the GDP growth rate is showing an upward trend.

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