Letters to the editor dated September 21, 2021

This has reference to ‘Making the banking sector more vibrant’ (Sep 21). The banking industry is facing the unique problem of excess liquidity for which it is not finding avenues of profitable deployment. Banks have commitments of 40 per cent on priority sector lending and 4 per cent on Cash Reserve Ratio(CRR), both giving inadequate or zero returns. This brings pressure on profits as banks are sandwiched between lack of lendable avenues and low returns on mandatory commitments. The priority sector has to be redefined and the lending requirement of 40 per cent needs to be reduced. The RBI should also rethink on paying interest on CRR as it is carved only out of public money which deserves a decent return.

On the other hand, public sector banks have to compete with other banks, NBFCs and also non-banking non-finance companies in areas like retail and wealth management, most of which have lower operational costs. Banks have to improve the revenue stream and develop expertise for equity investments, bond markets, stress assets funding, insurance, etc.

Mumbai

Formation of NARCL (National Asset Reconstruction Company Ltd), also called as “bad bank”, is hailed as a revolutionary step to resurrect commercial banks from the problem of NPAs. ₹2-lakh crore fully provided NPAs are set to be transferred to the bad bank initially. The value of assets backed by the ‘delinquent assets’ are conservatively estimated at ₹36,000 crore calculated at 18 per cent by applying weighted average method. This proves that banks are taking a straight hit of ₹1.64-lakh crore in their books which translates to 82 per cent. Considering the same, guarantee support in the form of contingent liability extended by the government of ₹30,600 crore is too miniscule and hinges on recovery made by NARCL.

Overall, though the primary intention to form a bad bank appears constructive, financially it takes a heavy toll of taxpayers’ money either way — through capital infusion on the part of the government or through write-offs made in the books of accounts maintained by commercial banks.

Chennai

Apropos ‘Surgical strike in Punjab’ (September 21), it took a lot of effort on the part of the Congress high command to take the final plunge of appointing a new chief minister, showing that its hold is no longer that strong. The former CM may have lost his popularity, but there is no good evidence that Navjot Singh Sidhu has the appeal to take the party forward in the State.

The moves of the deposed CM will be worth watching. The solace for the party is that the opposition in the State is weak and divided.

Pune

The Indian stock market still looks tied to the nascent days of command economy wherein speculation and short haul political developments pushed funds into speculation than real investment/capacity addition.

With diminishing incentives for savings, the allocations are getting pushed into the market at an alarmingly high rate. Small investors must get wiser to a regime wherein big investor sentiment prevails over fundamentals.

Mauled by Covid, the nation ought to be concerned over its average citizen receiving interim sustenance till jobs and businesses are reclaimed.

Navi, Mumbai

It is surprising that the Centre is in a tearing hurry to export vaccines when its own populace is floundering to get vaccinated. A key reason for schools not resuming physical classes is that children are not inoculated. If the country is indeed flush with jabs then why is the government putting riders for vaccination for its own citizens? Many countries are contemplating booster jab as the efficacy of the antibodies might have waned for those who received two doses early. The government ought to revisit its policy.

Noida

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