Debt is very much like dynamite: Dr Raghuram Rajan to Corporates
Updated: Dec 11, 2015 02:30:35pm
Kolkata, Dec 11 (KNN) Cautioning the corporates against “temptation” to over-borrow, RBI Governor Dr Raghuram Rajan said debt is very much like dynamite which can be explosive at some times.
Dr Rajan also said that RBI is maintaining a database which is being shared among banks to avoid over-borrowing by large corporate houses.
"Debt is very much like a dynamite. It is an instrument which is very useful in right places and explosive in others," Rajan said at the Presidency University.
The governor also called for moderation in use of debt as "there is always a temptation to overuse it".
He also made it clear that despite the difficulties associated with debt, "burying it is not an option".
"Moderation is required and some debt is good and not too much. Avoid over-borrowing to avoid problems," Dr Rajan said.
Acknowledging that Indian banks have the right kind of leveraging, he added that "those who said the banks have no capital requirements are not sensible".
Citing the example of Indian economy, he said foreign share in government debt is 3-3.2 per cent, which is "very reasonable".
"It is easy to fall to the temptation of easy money from outside and then, get into problems later. There is a need for the golden mean," he stressed.
Talking about the need for debt in society, Dr Rajan said it's also responsible for creating "an antipathy" among entities.
He called GST as "a good move", and said, "It will remove barriers among states and make a common market. It will bring more people under the tax net." (KNN Bureau)
Dr Rajan also said that RBI is maintaining a database which is being shared among banks to avoid over-borrowing by large corporate houses.
"Debt is very much like a dynamite. It is an instrument which is very useful in right places and explosive in others," Rajan said at the Presidency University.
The governor also called for moderation in use of debt as "there is always a temptation to overuse it".
He also made it clear that despite the difficulties associated with debt, "burying it is not an option".
"Moderation is required and some debt is good and not too much. Avoid over-borrowing to avoid problems," Dr Rajan said.
Acknowledging that Indian banks have the right kind of leveraging, he added that "those who said the banks have no capital requirements are not sensible".
Citing the example of Indian economy, he said foreign share in government debt is 3-3.2 per cent, which is "very reasonable".
"It is easy to fall to the temptation of easy money from outside and then, get into problems later. There is a need for the golden mean," he stressed.
Talking about the need for debt in society, Dr Rajan said it's also responsible for creating "an antipathy" among entities.
He called GST as "a good move", and said, "It will remove barriers among states and make a common market. It will bring more people under the tax net." (KNN Bureau)
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