Letters to the Editor dated November 16, 2019

Apropos the editorial ‘India against investors?’ (November 15). Though India went up the ladder in the global ease of doing business index, the ground reality on the plight of investors in India is regrettable. Airtel and Vodafone claimed a combined humongous loss of ₹73,000 crore due to AGR and high spectrum costs. Foreign companies are in the verge of leaving India facing continuous, huge loss and several other constraints. Though India remains firm on its ‘Make in India’ campaign, it is all talk. An effort of both the State and Central governments to bring in an investor-friendly climate will lure investors.

Sivakasi

‘Retail investors hurt in DHFL free-for-all’ (November 15) has provided insights on the ineffective and snail-paced momentum of the DHFL-NCD imbroglio. Earlier, investment in bonds and bank deposits contributed towards safe, steady and regular income for small investors. The falling interest rates in bond markets diverted investor attention towards equity markets directly and through mutual funds. However, small investors face more risk due to regular volatility in the equity markets. To facilitate availability of alternative sources of funds through low-priced NCDs and bonds, the rules were relaxed to give corporates access to capital markets. However, investor sentiment in the bond market may not improve in the absence of effective compliance standards by issuers .

Bengaluru

This refers to the report ‘Moody’s cuts growth forecast to 5.6% due to ‘longer slowdown’ (November 15). Last week’s quick response from the Finance Ministry to another aspect of the Moody’s report, though likely to be dubbed “damage control”, has to be welcomed as it goes beyond defence and carries facts and figures supporting long-term optimism.

But international stakeholders, who should be investing in India, depend more on the language with phonetics like Baa2 or BBB-. Therefore, India should prioritise creation of a trustworthy rating agency of international repute headquartered in the country.

This proposal should be considered given that the rating agencies with ‘brand names’ like Moody’s, Standard & Poor’s and Fitch look elsewhere for guidance and are ill-equipped to go deeper into the “SWOT” inherent in emerging economies like India. They are, bluntly put, extended arms of external vested interests.

It is time we have a professional ‘Made in India’ rating agency of international repute which will factor in the country’s hidden domestic resources, relatively lower consumption needs and undertake specific research on the country’s economic strength, as was done by Abhijith Banerjee and associates in the field of poverty.

Mumbai

This refers to ‘MFIN aims to set up steering committee to administer ‘Code for Responsible Lending’ (November 15). While the self-regulating Code for Responsible Lending (CRL) covers the entire micro-credit industry, the move to set up a steering committee to oversee the smooth administration of the code is imperative.

At a time when multiple lenders like banks, NBFC-MFIs, small finance banks, etc., are engaged in extending micro-credit to borrowers, the chances of both over-borrowing and excessive supply of credit are possible. In terms of the code, allowing only three lenders to fund a single borrower and capping the loan at ₹1 lakh per borrower is stipulated to prevent the poor borrowers from over-leveraging and also to ensure the quality of the loan asset.

While the micro-credit beneficiaries hail from the poor strata of the society and utilise the loan for self-employment, many times they borrow from informal moneylenders to pay back their outstanding debts to the financial institutions. The moneylenders still hold a key position, lending at exorbitant rates of interest and, therefore, it is essential to give a push to micro-finance institutions to enhance the flow of credit at reasonable rates.

Kottayam

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