Worrying signs

That the Financial Bill for 2023 with 66 amendments was passed by voice vote in the Lok Sabha without any productive discussion or debate is a matter of concern.

One of the key amendments is the contentious decision to scrap tax benefits for debt mutual funds. While it is primarily aimed at removing the advantage debt mutual funds have over bank deposits, its possible negative ramifications on the growth and development of the bond market cannot be overlooked.

With this move, the Centre wants to prevent any investments from going tax-free. But the Centre must try to expand the tax base.

M Jeyaram

Sholavandan (TN)

Farm mechanisation

Apropos ‘Mechanisation of farms’ (March 29). The writers bring to the fore the mismatch between the demand and supply for agriculture machines thanks to lack of data.

A worthwhile option is to channelise the demand for agro machines through agricultural cooperatives and make machines available through either ownership or on a rental basis. Cooperative cluster farming by marginal and small farmers will boost mechanisation.

The government must help farmers to hire machines at cheaper cost.

NR Nagarajan

Sivakasi

Opacity is not the answer

This refers to “Flip side to bank transparency” ( March 29). Transparency is the hall mark of any banking system. Being opaque cannot be a solution to prevent bank runs. Since deposits are nothing but hard earned money of the public neither banks nor NBFCs can afford to keep asset quality away from the attention of the public.

Unlike in India, in the West governments rescuing banks through tax payer’s money is an exception. In India depositors believe that the value of their deposits do not fluctuate in value.

Another reason being that depositors in India enjoy fixed rate of interest.

In India banks and NBFCs cannot be treated on par as far as transparency on asset quality is concerned. The 2016 asset quality review was primarily directed towards commercial banks. But NBFCs like IL&FS could not be saved from collapse. Nevertheless, such NBFCs not being part of deposit taking institutions, the consequences of such institutions being less transparent leading to run on deposits is rather remote.

Srinivasan Velamur

Chennai

Loan write-offs

With reference to the news report, ‘PSBs wrote off ₹91,000 crore in 9 months of FY 23’ ( March 29). The writing off of bad loans is intended for cleansing the balance sheet, besides sustaining the lending capacity and capital adequacy. The write-off never undermines the importance of recovery in those accounts, however, once the bad assets go out of the balance sheet the priority to recover the dues also turns dismal.

As the full provision given to those loans has been charged to the profit and loss account, which is a loss to the stakeholders, the recovery measures and the spirit being taken in the active loans that are part of the balance sheet must also be strictly followed to compensate the earlier losses.

Even though it is a prudential write-off, however, the banks’ efficiency in recovering the written-off loans indicates that it is as good as a normal write-off of bad debts. Ultimately the vulnerable sections of society are the real losers.

VSK Pillai

Changanacherry

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