Letters

Letters to the editor dated August 18, 2021

| Updated on August 18, 2021

Small is beautiful

Apropos the editorial ‘Bank on SFBs’ (August 18), with less than five years of existence,SFBs are making good business and reporting encouraging results.

It is sad to note that SFBs want to come out from the niche banking concept and want to embrace the Universal banking model, which is not a good idea.

To compete with global banks, the government has taken the major step of reducing the number of PSBs. Besides, a few PSBs are also identified for privatisation.

Before venturing into universal banking business, the SFBs need to learn lessons from some of the recent bank failures. In short, time is not ripe for SFBs to become big.

RV Baskaran

Chennai

Credit woes

With reference to the article ‘MSMEs are hit by risk-averse banks’ (August 18), a sizeable number of MSMEs have no option other than to borrow at exorbitant rates from the local money lenders.

Despite the high cost of borrowing, the small units prefer local money lenders because of the documentation hurdles they face while accessing credit from formal sources such as banks.

Notwithstanding the fewer risks, and profitability of small loans, banks are not exploiting these business opportunities.

The established medium enterprises are getting a better deal from banks than the tiny units in the informal sectors.

To make banks to lend more to MSMEs , the government has strengthened the existing credit guarantee, and the RBI has enforced the loan restructuring facilities for MSMEs to ease the servicing of loans, besides other measures to curb NPAs.

It is high time bankers shed their risk-averse attitude and accelerate the credit flow to the segment. The fear of loans turning NPA is meaningless. The attitude of the borrowers too must change regarding servicing of loans.

Therefore, an attitudinal change of the lenders, as well as borrowers, is an utmost necessity.

VSK Pillai

Changanacherry

Indeed the government’s ₹3-trillion rescue package for small and medium sized businesses is yet to take off, thanks to the credit aversion of banks.

Uncertain business outlook has blocked the formal source of bank finance to MSMEs. Banks too have not come out from the NPA mess and they have not boosted loans to MSMEs.

In this context, MSMEs’ dependance on informal sources of finance is inevitable.

Many MSMEs are still reeling under the pandemic hit, their revival depends upon the orchestrated effort of the government and the banks to boost low-cost, formal credit.

Sanctioning a bad proposal and rejecting a deserving proposal are the conundrums on the side of banks and they have to take the lead role in revival of MSMEs by averting such negative attitude towards lending.

NR Nagarajan

Sivakasi

Currency conundrums

With reference to the article ‘Will the euro break the dollar hegemony’ (August 18), the concern is that the dollar, as world’s reserve currency, is getting weaker.

The dollar accounts for more than 80 per cent of all foreign-exchange transactions, over half of all international trade invoices and two-thirds of central bank reserves..

But the US is no longer the bastion of international financial security. It has a $21-trillion debt ; it persistently runs fiscal and trade deficits.

Its foreign currency reserves just covers two weeks of imports. Can one expect the US to strive and regain dollar’s stature — No.

In large part, the dollar’s appeal stems from the depth and liquidity of the US’ capital markets. There is no sign yet of an alternative world currency or a stable basket. The euro has proven to be indifferent and Chinese yuan represents the currency of an totalitarian regime of an unknown debt burden and with capital controls.

R Narayanan

Navi Mumbai

Published on August 18, 2021

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