RBI’s forex intervention

The claim of IMF on RBI’s excessive forex intervention is nothing short of the US treasury department earlier calling India a ‘currency manipulator’ and placing India on a watch list. The information from the World Bank’s latest Migration and Development report reveals that India occupied the top remittance recipient spot with an inflow of $125 billion. This has to be seen in the light of the dollar gaining strength on account of rapid rise in interest rates and Federal Reserve’s continued tight monetary policy.

In this situation reclassifying India’s exchange rate management policy as ‘stabilised arrangement’ from ‘floating’ should be construed as a natural phenomenon, when the RBI uses its forex reserves to stabilise its currency to arrest volatility. Currency stabilisation is an extension of ‘floating rate’ policy pursued by the RBI and as such it is within its purview to use its forex reserves for intervention to promote external trade as the situation demands when the world is facing disruption in supply chain and fluctuation in crude oil prices.

Srinivasan Velamur

Chennai

Passing of Bills

This is with reference to the editorial ‘Parliament diminished’ (December 20). When people vote parliamentarians to power they place a lot of hope on them.

India being a developing country, the timely passing of various legislation is crucial to sustain economic growth. The ruling and opposition parties should cooperate to pass important Bills. Political parties may have differences but that should not come in the way of hurting the nation’s interests. Parliamentarians should be more sensitive to the problems faced by the people and should rise above petty politics.

Veena Shenoy

Thane

MSMEs need support

This refers to ‘MSME closures are still high amid emergence of new growth avenues’ (December 20). Notwithstanding the key role played by MSMEs in generating jobs, products and services, they are facing severe stress. Even though the government is creating an enabling environment to attract more entrepreneurs there are still many roadblocks. Institutional credit at more reasonable rates, access to cheaper raw materials, and effective ways to collect receivables within a short time are issues that need to be addressed. Also, the compliance burden on MSMEs has increased. A lot of small units are unable to follow the regulations due to the lack of knowledge, etc. The government must take proactive measures to motivate the entrepreneurs.

VSK Pillai

Changanacherry, Kerala

Evergreening of loans

With reference to ‘RBI clamps down on evergreening of stressed loans via the AIF route’ (December 20), the RBI’s action plugs a much abused loophole by the borrowers and lenders for evergreening loans. Far too many instances of such misuse of Alternative Investments Funds (AIFs) have been noticed by the regulators and the current RBI directive will put an end to transactions that seek to mask the reality of stressed loans and will lead to faster detection of NPAs and follow up for recovery. This unethical practice of evergreening through AIFs has also exposed the investors in AIFs to an enhanced risk and diminished their capacity to arrive at informed decisions, thus compromising the stability and credibility of financial markets. The changes made by the regulator would have a salutary effect on the financial system.

Kosaraju Chandramouli

Hyderabad

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