The Hindu Business Line : Allow DFIs to access

One of the instruments for mobilising low-cost funds by development finance institutions (DFIs) for their refinance operations was through the Capital Gains Bonds (CGBs). Nabard was able to mobilise and deploy Rs 13,596 crore through this instrument till March 31, 2006. This facility was withdrawn for Nabard from April 1, 2006. In such a situation, the bank was obliged to mobilise funds from the market at high cost for providing refinance support to rural credit institutions to fulfil its mission as well as servicing past debts. Raising the high-cost funds from market and purveying the same at cheaper rate for private investments for rural development not only strikes at the very core of developmental initiatives but also renders Nabard's operations unsustainable. Refinance support to financial institutions at concessional cost is particularly critical during the rising interest rates regime that tend to eliminate less risky and low return projects, especially pursued by the poor farmers. Such token exemptions of tax on Capital Gains Bonds may go a long way in removing the supply constraints that are supposedly the root cause of high rates of inflation in the Indian economy. This is mainly because the benefits of investments in real terms through refinance and promotional support from Nabard far outweigh the expected revenue loss to the exchequer. A rethink on allowing Nabard to access low-cost funds through Capital Gains Bonds is a welcome idea.

Dr. A.K. Bandyopadhyay

CGM

Nabard, Mumbai

Reduce age limit

for senior citizens

The threshold age limit for senior citizens be reduced to 60. This will ensure that an individual could enjoy these benefits upon his retirement. Exemption Limit under Section 80DDB - Deduction in respect of medical treatment for specified ailment - be increased to Rs 1 lakh and to Rs 1.5 lakh for senior citizens. Section 80HHC - Deduction in respect of export turnover - to be allowed at 20 per cent of such profits as defined under the Act. Every export consignment that leaves our country's shores is a brand ambassador for India. This will be a small incentive for the effort involved in matching international quality standards, standing up to stiff price competition, meeting precise delivery schedules and earning foreign exchange for our country. Penalty for concealing income or submitting inaccurate particulars of income to be levied only if there is an intention to defraud.

M.K. Muralidharan

Muralidharan Iyengar & Co,

Chartered Accountants, Mumbai.