Letters

Letters to the editor dated September 01, 2021

| Updated on September 01, 2021

V shaped? Not yet

This refers to the Editorial “On the mend” (September 1). While there is much to cheer about the GDP growth in the first quarter of this fiscal, there are still some critical hurdles to cross. Goss capital formation has gone up mainly by the government’s investment, but the target should be private sources.

Low consumption is also because of the slump in the large informal sector and MSMEs which is not captured by the quarterly figures of growth — it is here that poorer sections of the society are employed mostly. Those working in tourism and hotel sectors have suffered most.

The government needs to step up measures to overcome these bottlenecks by encouraging private investment, supporting the languishing sectors financially and incentivising high employment-oriented industries to enhance consumption. Simultaneously, vaccination drive must also be accelerated. Whether the revival is V-shaped will be seen in the next quarter at least.

YG Chouksey

Pune

Overhauling deposit insurance

With reference to the article, ‘Deposit insurance needs overhaul, not tweaks’ (September1), an uniform level for all banks and depositors is not called for. Deposit insurance must cover only weaker banks and only of depositors having average deposits not exceeding certain amounts in all banks put togethe.

At the same time the depositors should be notified in advance about the risks involved especially senior citizens. Banks which charge higher lending rate are riskier for depositors. On the other hand, deposit insurance has to be used only as an interim support and the viability of the affected bank needs to be established like any corporate under IBC. The FRDI Bill is needed for that.

M Raghuraman

Mumbai

Apropos ‘Deposit insurance needs overhaul, not tweaks’, (September 1), the writer has rightly hinted that it would be more appropriate if an Financial Resolution and Deposit Insurance cover for insured amounts is made the key while implementing the DICGC scheme.

Ultimately it is the household and non resident savings along with the quick resolution of the troubled banks that should be speedily settled to reduce the hardships being faced by the customers. The institutional deposits should be treated separately and should not be clubbed with insurance coverage of individual deposits. The very fact that deposits were opened on different names implies that there were different personalities or holders of deposits which should not negate the issue of insurance coverage. After all, the banker acts in good faith and without negligence.

Katuru Durga Prasad Rao

Hyderabad

Forex market volatility

This refers to the article ‘Nixon shock and dawn of a volatile world’ (September 1). Indeed President Nixon’s decision to end dollar convertibility to gold and implement wage freeze to solve their gold run, domestic inflation and adverse balance of payments problems changed global financial markets forever. It led to convertibility with their own parity to other currencies of the world, ending the Bretton Woods mechanism.

Central banks became powerful on the domestic and international currency markets, but the dollar still remains the reserve currency and a key parameter for deciding exchange rates. Digital currency is now challenging the central banks’-controlled fiat money and dollar seems a weak wicket now.

China, given its economic and political power, is now challenging the dollar’s status as reserve currencyand is trying to control global currency markets. US has to fight at least to keep up the respect for dollar as a reserve currency in the midst of volatile global financial markets.

NR Nagarajan

Sivakasi

Published on September 01, 2021

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