“Don't play ball only with Pakistan” ( Business Line , April 14) was an eye-opener. The author is right when he says that “(it is) a misplaced belief that “cricket diplomacy” would bring people in India and Pakistan together”. Indians must, sooner than later, realize that we can never have peaceful, brotherly relations with Pakistan. After all, their declared official policy is that their nuclear weapons are only for using against India.

Anil P

Seeking an alternative

The heading “Anna Hazare misses the point” ( Business Line , April 13) seemed intent on discouraging Anna Hazare's movement. How can we remove the root causes of corruption? Election funding is the main issue. Please suggest alternative measures, instead of simply calling the movement wrong, which is unjustified. It is open to all to propose alternative measures to supplement the anti-corruption drive. “Poverty is proportional to corruption.” Almost 50 per cent of the world's poor are in India. It can't get worse. At the moment, the government looks to be in control of an oligarchy.

Korath V. Mathew

Growth, inflation

The article “Once more with anguish” ( Business Line , April 14) explained how high-growth and, at the same time, low inflation is possible. Referring to the highest growth rate and lowest inflation over 2003-07, it said that low global food prices was the reason.

It was pointed out that Indian policy has a number of propagation mechanisms that convert a relative price rise into inflation. MSP, once raised, cannot be lowered. If MGNREGA's record in creating assets is poor and productivity does not rise, what about the ever increasing and high salaries in the service and other sectors?

It may be taboo to refer to emergency days. But Indira Gandhi enforced it and brought prices under control. Exchange rates play their own part. Recently, the IMF said that India has overtaken China in growth rate, by a notch — India's at 10.4 per cent and China's at 10.3 per cent, in variation of official figures. The method of calculation, taking into account the exchange rate, is said to be the reason. So it is evident that policy changes are needed.

Jacob Sahayam

Thiruvananthapuram

More loans for affordable housing

I refer to the news item “Fund coming to help boost lending for affordable housing” ( Business Line , April 15), with regard to facilitating  affordable housing with loans up to Rs 5 lakh with a guarantee cover. While the scheme proposed to be administered through NHB looks good, I feel that the amount is too low and it may not encourage banks.

In cities and major towns the amount will not fetch a unit to accommodate a family of four. There is a greater movement from villages to cities/major towns causing congestion.  It is necessary to decongest with an offer of easy loans through such agencies which gives comfort to the bankers. With the increase in retail NPAs, banks are wary of extending small loans, which call for more time and cost considering the amounts involved.

The guarantee fund assuring safety of funds for bankers, it is expected, will encourage banks. But it is, again, a cross-subsidisation by  honest borrowers who bear the guarantee fees.

Since the housing loans are covered by primary security of financed assets (mortgage of house) and banks do not insist on a third-party guarantee, it is not clear how well the scheme will be received. Instead the fund may be used for refinancing banks on such small loans.

Further the fund may provide life cover for borrowers covering the loans through the life insurance companies which will assure the banks liquidation of funds in the event of death of borrowers.

Many small loans become NPAs even when covered by mortgage due to the long legal process and the hurdles encountered in getting the house vacated by the legal heirs, also depriving them of their dwelling.

L. Rangarajan

Chennai

New money-lenders

It was sad to learn from “Field staff of microfinance firms turn money-lenders!” ( Business Line , April 13) that those who were part of the force to protect the poor from usurious money-lenders have turned money-lenders themselves.

If the MFI field staff members are offering small loans to those who need urgent funds, one should understand and appreciate that they are only fulfilling a felt need.

Traditional money lenders have already become active after the MFI Act came into force, extending loans briskly to needy persons at interest rates ranging from 60 per cent to 120 per cent.

The Government official has stated the obvious, though unwittingly. He said “the District Collectors are empowered to take action against unregistered money lenders”. Yes they are empowered but they do not bother to taken action. They prefer to take action against the poor field staff of the MFIs for just talking to the borrowers.

There are no loans from the banks or SHGs or funds for agricultural operations or other rural activities coming in from any sources.

The rural households are getting restive. The stalemate in the MFI sector is likely to soon have a severe backlash on the Government and politicians, unless they wake up immediately and remedy the situation.

B.Vithal Rao

Hyderabad 

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