Low interest rates and abundant liquidity are a problem, according to D Subbarao, the former governor of the Reserve Bank of India.

On Thursday, former Reserve Bank of India Governor D Subbarao expressed concern that today's low interest rates and massive liquidity in the system could threaten financial stability.

Subbarao said at a conference here that the challenge for central banks including the Reserve Bank of India was to juggle maintaining price stability, promoting growth and employment, and keeping financial stability in a globalised world.

He made those remarks at the Great Lakes Institute of Management's 12th annual Union Bank Finance Conference, which was held here. "Today, the Reserve Bank of India has maintained extraordinary policy for the last two years after Covid-19 impacted the country, which has been very necessary, and RBI has taken the right approach and has been important in keeping the economy moving forward," he said. "The danger now is that the low interest rates and vast amounts of liquidity accessible in the economy may threaten financial stability," he warned. "It happens because there is too much money floating around in the economy and people aren't getting adequate returns...," he explained.

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