With reference to ‘RBI Governor expects to lower lending rates’ (July 9), wherein it was mentioned that ₹1.34 lakh crore window is made available to banks under facility to avail liquidity for liquidity coverage ratio (FALLCR). There is a growing opinion that banks can make use of this facility and increase their exposure to NBFCs. This is not true.
FALLCR helps the banks to avail liquidity from RBI under stress conditions and also allows them to recognise a percentage of government securities within the mandated SLR as HQLAs (High Quality Liquid Assets) for calculating LCR (liquidity coverage ratio). The liquidity facility is unlikely to be availed of as no bank, at present, qualifies for the ‘stress conditions’ as defined by the RBI and the applicable interest rate is also higher at 200 bps above repo rate. Hence RBI’s decision of one per cent increase in FALLCR to be reckoned as HQLA for LCR purposes, will be of use only in such cases, where there is a shortfall to meet mandated LCR requirements on account of incremental exposures to NBFCs/HFCs. As on date, most of the banks are above LCR stipulations by a comfortable margin and status quo on exposure to NBFCs/HFCs is likely to continue.
V Viswanathan
Coimbatore
Manufacturing woes
With reference to ‘Manufacturing sector: Struggling to take off’, there was a time when both Manufacturing and Agriculture used to be the backbone of our economy. But now both these sectors are crying out for relief. When ‘Make in India’, launched with much fanfare, has not achieved its desired results then the Modi government has its task clearly cut out now for next five years to revive manufacturing. One cannot emphasise the criticality of MSME sector for the economy’s revival enough. Given that a significant number of MSMEs fall under unorganised sector, it makes the government’s task that much harder to provide assistance to them. But GST should made lenders’ life easier to provide financial assistance to MSMEs. These small companies need hand-holding to flourish and create a significant impact on both GDP and employment.
Bal Govind
Noida
Create a talent pool
With reference to new report “Why a home-grown economist is best suited to be RBI Deputy Governor” (July 9), while the government’s preference while making top level appointments has always been for amenable individuals, merit and professional integrity were rarely compromised while filling top level positions in RBI. The reasons for Raghuram Rajan not getting extension beyond three years and Urjit Patel and Viral Acharya cutting short their own tenures as Governor and Deputy Governor are ‘personal’ though not in the sense the word is generally understood.
The three distinguished economists came to RBI on sort of ‘sabbatical’ retaining their liens elsewhere. Such inter-mobility of roles, for attracting talent, in the normal course, should have been outside the regular rolls.
For appointments at the highest level in RBI and other establishments, the government should maintain a talent pool in a transparent manner from among willing candidates working anywhere in the world.
MG Warrier
Mumbai
Budget for New India
The country has adopted a mixed pattern of economy where both public and private sectors have an equal and important role to play.
The Budget lays down greater emphasis on stepping up considerably the private investment and proposals for kick-starting the virtuous cycle of investments are most welcome.
Investment in infrastructure is a key. MSMEs also got the required focus in terms of making them more competitive and create more jobs and push exports. PPP model for rail projects, ‘one nation one grid’ to improve power connectivity with equal focus on poor and downtrodden, water, education, health, housing are well thought out initiatives.
An inclusive Budget that caters all sectors of economy and all sections of people will help in building a new India.
Published On : 09-07-2019
Source : The Hindu Businessline
