The Reserve Bank of India on Thursday allyed concerns about capital inflows building an asset bubble and said it is keeping a vigil on these.
"If there is too much liquidity, it has the potential for asset price build-up," Governor D Subbarao said.
However, "every asset price build-up need not necessarily result in a bubble," he told reporters after a meeting of RBI's central board of directors in Kolkata.
Subbarao said that capital inflows were in line with the country's requirement.
The surge in capital flows was not like what happened between 2006-08, he said, adding "If and when there is excess of capital flows, we will have to respond to that situation."
Subbarao said it was not possible at this point of time to speculate on what if anything the apex bank would do to contain the quantum of capital inflows.
The RBI on Wednesday tightened the guidelines for corporates raising resources from external commercial borrowings.