'Oil a worry, but no review of targets'

Stating that the Reserve Bank of India (RBI) was closely monitoring the oil price scenario, RBI Governor YV Reddy said as of now there was no move to review GDP growth targets in the wake of the rise in oil prices.

"We have to wait and watch," he replied to a query on the impact of oil prices on the Indian economy. He added that the government was yet to take a decision on oil price pass-through.

Responding to a question on the interest rates at the venue of the ADB annual general meeting, Reddy said rates would move according to credit flow into development activity.

While observing that banks' exposure to real estate had increased enormously in recent times, he, however, sought to delink the decision to raise rates from this fact.

"To keep banks healthy, interest rates need to be at a comfortable level. It is with this intention that changes in lending rates would take place and not to impact the real estate sector," he said.

Responding to a question on the recent controversy involving private microfinance institutions, the RBI governor said microfinance activities could not be regulated as they fell in the informal sector. He said that microfinancing was essential for the expansion of rural credit.

According to him, banks and RRBs were asked to hold a meeting to examine the recent allegations of high rate of interest being collected by microfinance companies and come up with suitable remedies.