Letters to the Editor dated May 20, 2020

This refers to your editorial ‘Burdening the banks’ (May 20). Ever since the outbreak of Covid-19, the GDP growth has come under severe pressure. The government and the RBI have been initiating various stimulus packages to prop up the sagging economy which is expected to decelerate to a record level ever since 2008 credit crisis. The government has come up with relief packages, but the impact they would have on the economy is debatable.

On the other hand, the RBI has been providing liquidity to banks in various forms to help them weather the Covid storm. But instead of helping businesses to meet the credit requirements, banks have parked a record ₹8.4 lakh crore with the RBI itself making mockery of the measures initiated by the central bank to prop up credit. Further, the support extended by the government in the form of credit guarantees cannot be construed as a direct support extended to the ailing MSME and other sectors as the same does not amount to any immediate financial outflow. Hence it is time that the stimulus package released by the government is aimed at creating demand through direct fiscal measures to industries.

Chennai

Bankers’ dilemma in implementing stimulus measures continues to persist and prevents them from functioning effectively. The directive to complete the mega merger of major banks within the time lines has already entailed huge pressure on them, in terms of technology integration, consolidation of books, customer orientation, and resolution of HR-related issues.

The credit guarantee support proposed also may not augur well, since the CIBIL score of borrowers is neutralised by the RBI only during moratorium period and the outstanding loans past 30 days will become due and impact the borrowers’ rating again from June. Postponement of insolvency proceedings is only pushing the mounting risk to a later date. As aptly suggested, the fiscal package announced should have been directed towards increasing the demand side.

Bengaluru

Apropos ‘India should strengthen ties with Taiwan’ (May 20), the author highlights the importance of diplomatic relations with Taiwan and seeking its co-operation in areas such as fabrication of semi-conductors. Semi-conductors are critical to the manufacture of communication and electronic equipment. In the same breath, it must be mentioned that there’s dearth of infrastructure in India — uninterrupted power supply, access to large quantities of clean water, experienced workforce, etc — to undertake semi-conductor manufacturing. There is also the difficulty in competing on the price front with entrenched low-cost manufacturers such as China and Vietnam, and in integrating into the supply chains that are built around semi-conductor manufacture. Hence, India needs to lay the enabling groundwork for such industry while, at the same time, enhance diplomacy with Taiwan for technical knowhow.

New Delhi

With global leaders/corporates counting on herd-immunity to revive economic activity soon, a vaccine appears to be the only long-term solution to curb the fatalities across the globe, especially when most infected carriers are asymptomatic. Early results from human trials in the laboratory may have been encouraging, as participants were observed to have developed antibodies against the virus.

However, a vaccine is expected to do more than just block the infection or its entry into the lungs, it must perform the recovery function without generating undesirable side-effects or sickness in any other form.

Another potential challenge could stem from the delayed availability of the vaccine in India and the need for over a 100 crore syringes to vaccinate thereafter. Being able to vaccinate a huge population only in 2021, against a virus which originated towards the end of year 2019 could prove to be detrimental.

New Delhi

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