Letters to the editor dated March 3, 2020

Apropos ‘Mudra loans surge as FY20 comes to a close’ (March 3). The disbursement of loans under the Pradhan Mantri Mudra Yojana (PMMY) reaching ₹2.77 lakh crorepoints to the fact that the achievement is not without the danger of the disbursed loans turning into bad assets. Target-oriented sanction and disbursement of loans without ensuring the quality of the borrowers is common.

At a time when the banking sector is struggling to recover bad loans and maintain the quality of assets, target-oriented lending needs to be avoided. The creation of credit and delivery under specified schemes of the government must spread over the entire financial year. The government must insist that banks achieve targets on a monthly basis without compromising on asset quality. The mechanisms in vogue to monitor the sanction and disbursement of the loans under the specified schemes of the government must be strengthened and the bank’s lacklustre attitude towards such schemes must be changed.

Kottayam

The speed with which coronovirus is spreading across the globe is baffling. While the disease has been contained to a discernible extent in China, countries like South Korea, Iran and Italy have now stepped up their vigil and waging an relentless battle against the virus. The mayhem now being witnessed in global markets is nothing but a direct fallout of the coronovirus spreading its wings across the world. Cooperation and coordination among countries is key to tackle the epidemic of this magnifying proportion. With two people being tested positive for coronovirus in India, the health authorities should leave no stone unturned to ensure its spread is kept under check. Effective handling of the outbreak by China needs to be attributed to its highly-funded public healthcare institutions.

Sholavandan, Tamil Nadu

Apropos ‘Sanctity of bank guarantees is sacrosanct’ ( www.thehindubusinessline.com ). Banks classify letters of both guarantees and credits (LGs and LCs) as contingent liabilities and show them as footnotes in balance sheets. But, once these are invoked, banks are duty-bound to honour them as liabilities and recover the claim amount from applicants, unless there is a suspicion of fraud. Not doing so is a clear violation of the terms of the contract.

Though India’s performance, as per World Bank’s ‘ease of doing business’ index, has improved, the very same report also places it low at 163 with reference to ‘enforceability of contracts’. In the circumstances, Bank of Baroda allegedly not honouring its LG invoked by Indian Oil Corporation and the severe strictures passed against the former by the Calcutta High Court are not exactly a good advertisement to ‘enforceability of contracts’ in India.

Chennai

This refers to ‘Link your PAN with Aadhaar by March-end to avoid ₹10,000 fine’ ( www.thehindubusinessline.com ). The reported fact that the Income Tax Department has issued a notification stating that a fine of ₹10,000 will be imposed (under Section 272B of the IT act) on all those tax assessees who fail to link their PAN with Aadhaar card before March 31 and that all such unlinked PAN Cards will be declared ‘inoperative’, is highly unlikely to be taken on its face value. It may be pertinent to recall that the last extension upto March 31, 2020 was granted by the CBDT vide its orders dated December 30, 2019. Curiously enough, similar extensions were also granted during its two preceding quarters. What does such a prolonged inconsistency/indecisiveness virtually imply?

But it was intriguing to observe that though the use of the PAN card as ID proof for non-tax related purposes has been permitted, there can be complications if the bank account is opened using an ‘inoperative’ PAN, as transactions come under the purview of the income tax. In any case, the CBDT must draw the ‘final’ curtain on the linking of the PAN card with Aadhaar this time around so that the very purpose of the move is not defeated.

Bengaluru

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