Letters to the editor dated June 4, 2021

| Updated on June 04, 2021

RBI policy on expected lines

With reference to ‘RBI keeps rates unchanged to support growth’ (June 4), such a policy stance of not tinkering with the extant repo and reverse repo rates was expected from the six-member MPC. Notably, there has been no change in the repo rate since April 2020 owing to the effect of the pandemic on the economy.

While the RBI remains committed to support the government in its endeavour to achieve growth targets, rising inflation is turning out to be a big stumbling block. The central bank, it may be noted, does not have any control over food inflation.

Vinayak G


Credit lifeline

Apropos ‘Extended lifeline’(June 4), banks must remain cautious in extending the Emergency Credit Line Guarantee Scheme (ECLGS) as overall demand crunch still persists and business sentiment continues to be dull. MSMEs are finding it hard to run their business and are not coming forward to borrow from banks even at the current low interest rates. Many micro manufacturers have piled up inventories and debt, and are closing their establishments.

No doubt, demand side stimulus has to be given, but it needs to be backed by well planned fiscal support measures to the poor who are generally the main consumers of MSMSE products.

Brij B Goyal


MSMSE support

Enhancing the scope of ECLGS without earmarking a separate sub-limit to the MSMEs is likely to hurt them. In these pandemic times, one of the most affected segments of the economy is MSMEs.

While appraising the credit requirements of large borrowers under the extended scheme, the lenders have to be more prudent and ensure that credit goes only to the most deserving borrowers.

Public sector banks are already weighed down by non-performing assets and any addition of NPAs will push up the credit costs, which will eventually lead to the need for further capital infusion and, thereby, stress to the exchequer. To make optimum use of the facility the government must look for the simultaneous execution of a credit-linked stimulus package also. The oversight and surveillance of the banking regulator must be strengthened.

VSK Pillai

Changanacherry, Kerala

Tenancy Act

This refers to the new Model Tenancy Act. The rental business is in doldrums, providing a meagre return of 1-2 per cent on capital investment. Those who had invested in houses and flats, not with the intention of earning rent but expecting appreciation in property prices, are also in the lurch. The spate of lockdowns has further dented the realty sector, especially the commercial segment.

With work from home culture gaining strength, this may play spoilsport for prospective lessors. Moreover, most of the property disputes are eventually settled out of civil court after protracted litigations. How can the new Tenancy Act be different? Our legal system enjoys low credibility and is reckoned as the last resort.

Deepak Singhal


Vaccine pricing

Despite protests, the Supreme Court has decided to review and monitor the purchase and distribution of Covid vaccines. Both Serum and Bharat have been selling their vaccines to the Centre, States and private hospitals. The pricing is such that the manufacturers hold the advantage of recovering the loss of profit on the sales to the Centre from the supplies to the States and private hospitals. Further, since the production costs are not revealed, one cannot be sure the vaccines are not overpriced.

When questioned, the government said the financial risks to the manufacturers in developing and manufacturing the vaccines are high. It argued, the freedom bestowed on them to fix prices needed to be viewed in that context. However, the lack of sensitivity in applying the risk-return trade-off theory during a catastrophe, where lives and livelihoods are under threat, stands exposed.

Haridasan Rajan

Kozhikode, Kerala

Published on June 04, 2021

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