Dr K. C. Chakrabarty, Deputy Governor, RBI, said that high interest rates might lead to a rise in non-performing assets (NPAs).
“If interest rates inch up then the probability of assets turning bad increases as the repayment burden goes up,” he said, while speaking to newspersons on the sidelines of the diamond jubilee celebration of RBI employees' sports club here on Friday.
Replying to a query about the possibility of further rate hikes, he said: “Hiking rates will stop when the inflation comes down.” The RBI would be comfortable with a near-term inflation of 6-7 per cent, while in the medium and long term it would want inflation to trickle down to 4-5 per cent and 3-4 per cent, respectively.
Regulating MFI
The RBI would equip itself to regulate the microfinance institutions if required. “The draft MFI Bill has to be approved by Parliament and, if the Government wants us to regulate MFIs, we will do so. If we are not equipped, then we will have to equip ourselves,” he explained.