Remedial measures

This is in reference to “Sensitive sectors will struggle if rates rise, say bankers” ( Business Line , July 27). The response from the bankers, whenever RBI introduces a hike in key rates is that it will affect the cost of their lending, leading to an increase in their lending rates.

The common man understands that RBI desires to contain inflation by increasing the rates. But if it results in an increase in cost, and finally overall prices everywhere, inflation will gallop, and the very purpose of the control measure objective will be defeated.

Why can't bankers initiate due cost control measures instead of passing on the increase in the rates to their borrowers to sustain the cost income ratio as targeted?

It is a well-known fact that much of the expenditure is avoidable and can be moderated or contained, if banks take due remedial measures.

B. N. Vihari

Visakhapatnam

A close finish?

The RBI's interest rate hike to combat inflation is beginning to look like a one-way route with very little traffic on the fiscal highway. The Governor has indicated that the RBI will continue to use this single-stick approach to tame inflation unless fiscal measures are taken.

Though high interest rates are compensating the Indian middle class investors, the role of the government in taming inflation through quality expenditure and policy decision needs to be critically reviewed.

Addressing headline inflation through frequent rate hikes might hit the confidence in long-term investments and paralyse growth. Inflation might enter the double digits, making the race between inflation and the number of rate hikes hotter. Will RBI announce its twelfth rate hike since March 2010, as inflation is also expected to reach 12 per cent or is this RBI's last tightening policy?

S. Vaidhyasubramaniam

Thanjavur

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