This is with reference to “Accounting for NPAs when economy is down” (Business Line, August 31). As of now, the economy is going through a slowdown. Financial inclusion initiative, priority sector and socio-economic lending obligations to the banks are obstacles to implementing IFRS accounting standard. Dual accounting theory may not be ideal for the economy, as it will not carry forward growth projections.

Arjun Kudoor

Mangalore

RBI review

This refers to the article, “Why not have variable CRR rates” (Business Line, August 30). We should concede that those complying with legal requirements or regulatory stipulations can have personal perceptions at variance from policies which they are implementing as part of their job.

RBI Deputy Governor Chakrabarty’s response rejects this principle. Relating CRR to banks’ capital-to-risk-asset ratios, besides being impractical from a timeline angle (assessment of the ratio and prescription of CRR), may have problems in monitoring and compliance.

Banks’ financial health-related issues can best be managed by prescribing higher capital adequacy requirements.

The RBI should use this opportunity to do a comprehensive review of capital adequacy, SLR and CRR stipulations and margins enjoyed by banks considering the capital needs of public sector and private sector banks, need to include new instruments in the basket of eligible assets under SLR, introduction of disincentives for maintaining excess SLR, and need to make government securities market-friendly so that their share in the SLR can come down, the impact of higher CRR on banks’ profitability, etc.

M.G. Warrier,

Mumbai

(This article was published on August 31, 2012)
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