RBI needs to act firmly
With reference to Gajendra Haldea’s article, “Monumental failures of RBI” (August 23), I fully agree with him that the Reserve Bank of India has failed to perform its role as regulator of the banking system in India. One reason might be the invisible intervention by vested political and government agencies and people.
Besides, with respect to demonetisation, the implementation of which was a mess, the RBI virtually followed the dictates of the government.
One wonders what the RBI was doing when non-performing assets (NPA) were piling up even as banks were writing off bad debts. There is a growing demand for fixing culpability for the granting of bad loans and the failure to recover them.
Haldea has rightly focused on the dilemma facing honest taxpayers. Let us hope the RBI will rise to the occasion and maintain its autonomy and act firmly to tackle the NPA crisis, otherwise the national financial system is bound to collapse.
No wonder, we are being dragged towards imposition of a financial emergency under Article 360 of the Constitution.
M K Bhandari Mumbai
There is still a yawning gap between what is said and what is done. Efforts to push exports have been one-sided so far; what is needed is easy capital for exporters to deal with the situation, as controlling exchange rates is not in the hands of the government. Trade financing should be made easier and could be along the lines of ease of doing business in India. Finance should be available to exporters on easier terms so that their cost of production is reduced. Import-intensive export products have a fractional benefit as imports of inputs are available cheap due to rupee appreciation.
For making export finance available at affordable rates, the government should rope in Export Promotion Councils (EPC) and Commodity Boards to play the role of trade financiers. These days some shipping companies provide trade finance to importers and exporters; still the cost of availing trade finance — be it LC, SBLC, discounting LCs, transferring LCs, pre- and postshipment finances via banks — has increased due to rupee appreciation and high bank rates due to the large volume of non-performing assets. EPCs and Commodity Boards in collaboration with banks and lending institutions should get bulk finance at zero rates and this should be provided to member exporters of repute as trade financing facilitators on agreeable terms.
The commerce ministry, which is granting Market Development Assistance to EPCs, exporters and importers, should have a separate fund to facilitate trade financing to importers and exporters via EPCs and Commodity Boards. The suggestion to set up such a fund is similar to that of the Trade Infrastructure for Export Scheme; it can correct the imbalance brought on by rupee appreciation and help exporters become competitive.
A Sathyanarayana via email