This refers to the editorial ‘Overly cautious’ (June 8). The decision of the monetary policy committee to keep the key policy rate unchanged at 6.25 per cent is a logical step given the circumstances. The demonetisation drive had led to the creation of excess liquidity which could not be productively redeployed by banks due to low credit demand from corporates. Instead, the banks have invested the funds in government securities.

Further, the capacity utilisation rate of industries also remains low due to consumption not picking up, justifying lack of demand for credit. Nevertheless, the RBI has created enough space for limited lending by effecting reduction in SLR rate by 50 basis points.

In the case of home loans, RBI has decided to reduce risk weight on specific categories. Rising demand from different States to waive farm loans has brought enormous pressure on banks that are already facing the problem of stressed assets, which have wiped out the net worth of some banks, giving little or no room for credit expansion.

Finally, the present stand of RBI has brought relief to senior citizens, who are already affected by steep fall in deposit rates.

Srinivasan Velamur

Chennai

Locking horns?

North Block and Mint Street appear to be on a collision course yet again with the RBI declining an invitation from the finance ministry for a meeting just before the monetary policy review on Wednesday.

This is not the first time that the finance ministry has tried to poke its nose in the working of the RBI. The central bank is well-equipped to take stock of the current macroeconomic situation and can perform better with least government interference.

NJ Ravi Chander

Bengaluru

Playing safe

Clearly, the RBI wants inflation to stay benign before it cuts rates. The state of Indian economy as it stands today may appear to be good but there are enough serious grey areas to cause plenty of worry and need to be resolved quickly to put things back on track. Playing safe rather than saying sorryis, nevertheless, a prudent move at this point of time. The RBI has now demonstrated the assertiveness that was expected of it.

Srinivasan Umashankar

Nagpur

The view that RBI should have cut rates to fuel credit offtake lacks basis. Already, the system is in excess liquidity of around ₹4 lakh crore and banks have parked their funds in SLR securities in excess of the mandatory requirements. Historically, interest rate cuts have had little impact on lending and the confidence of doing business.

With lower credit offtake in the corporate sector, banks push for retail portfolio, which is already overcrowded. Banks in their anxiety to expand retail portfolio should not finance sub-prime borrowers. Retail borrowers are more conscious about turnaround time rather than the cost of funds. Hence, the stand of RBI to hold rates is a welcome move.

S Veeraraghavan

Coimbatore

Be considerate

This refers to the report ‘Chatter over layoffs in IT industry highly exaggerated: TCS President’ (June 3). Companies say that sending off people is performance-based. But persons past a certain age would find it difficult to secure another job. Alternate solutions should be found to meet such cases. Employees should be forewarned in cases of unsatisfactory performance and given an opportunity to improve. Opportunities other than termination of jobs should also be considered.

TR Anandan

Coimbatore

Attack on Iran

The dastardly attacks on Iran’s parliament building and Khomeini tomb are condemnable. Iran has accused Saudi Arabia of behind these attacks. Arab nations need to present a united face in fighting terrorism. The war between Shia-majority Iran and Sunni Saudi Arabia has escalated now. India needs to tread its path cautiously as it has friendly relations with the Gulf nations. Lakhs of Indians are working in the region.

Deendayal M Lulla

Mumbai

LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002.

Related Topics
comment COMMENT NOW