RBI Governor Raghuram Rajan warns companies about high debt

KOLKATA: Reserve Bank of India Governor Raghuram Rajan said that large companies should restrain themselves from borrowing heavily from banks since over-leveraging creates trouble.

"Moderation is required and some debt is good. But not too much. Avoid over-borrowings to avoid problems", Rajan said Thursday n an interaction with students at the Presidency University in Kolkata.

Rajan is the city to hold RBI's central board meeting Friday.

He said RBI maintains a database of large borrowers and their status is shared among banks.

Citing the instance of Indian economy, he said foreign share in government debt is 3-3.2% which is very reasonable. "It is easy to fall to the temptation of easy money from outside and then get into problems later," he said.

On interest rates, Rajan said that reducing interest rates to very low level might not be good ide. "Better is to have growth in real activity rather than a financial market boom due to distortion in prices," he said.