Money & Banking

Equity bubble: RBI, SEBI need to be cognizant of risks going forward, says RBI Guv

K.R.Srivats | Updated on February 11, 2018 Published on February 10, 2018

Finance Minister, Arun Jaitley with RBI Governor Urjit Patel at the RBI board meeting, in New Delhi, on February 10, 2018.   -  Kamal Narang

Asserting that recent "bubble" in equity prices had not created any problem for regulators in India and abroad, the RBI Governor Urjit Patel on Saturday cautioned that both RBI and SEBI however need to be "cognizant of risks going forward".

The recent correction in equity prices underscores how capital market can quickly change directions, Patel told a press conference soon after Finance Minister Arun Jaitley's customary post-budget address to the RBI's Central Board.

The good thing about the recent equity prices spurt is that everyone part of the markets were talking about how the valuations were stretched and there was endogenously built risk aversion to this trend, Patel noted.

RBI Governor was responding to a question on whether he sees "bubble" like situation in equity prices, given the caution conveyed in the recent Economic Survey over surge in equity markets.


Patel said that banking credit growth stood at 11 per cent, which is very encouraging. The other interesting aspect is that capital markets funds raising has gone up substantially in the system with corporates tending to raise more debt resources from the markets. "This has led to higher debt-equity ratios and this trend bodes well", Patel said.

Finance Minister Arun Jaitley, who was also present at the press conference, said that SEBI had in their presentation to him this morning highlighted that corporates are now increasing their reliance on bond markets and this was an encouraging trend.


Jaitley said that he sees the next year to be "comfortable" on the revenue front, although it would be difficult to say at this stage if there would be any fiscal slippage in the next year as well.

" I can't say at this stage if there will be a fiscal slippage next year. It is impossible to predict how oil prices would move", Jaitley said.

RBI Governor Patel said that one needs to be prepared either way-oil price increase or decrease-as one can't predict how oil prices would move in the next year.

Published on February 10, 2018

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