RBI reserves

This refers to ‘Don’t need RBI reserves to meet fiscal deficit, says Jaitley’ (January 1). However, the government does not mind ‘using’ the same for recapitalisation of state-owned banks or for a poverty alleviation programme. As regards the issue of Economic Capital Framework (ECF) of the RBI, the Finance Ministry seems to be obsessed with ‘carving out’ a significant part of the central bank’s reserves (which include its ‘revaluation’ reserves). It has been emphasising that central banks of most countries keep a reserve of 8 per cent, while some conservative central banks maintain 14 per cent as against a reserve of 28 per cent being maintained by the RBI.

The government has already constituted a six-member expert panel to decide on the ‘appropriate’ level of reserve of the central bank. Let us hope the expert panel does full justice to the central bank’s mandated autonomy on the matter.

Panchkula

The Finance Minister’s statement that the government does not need reserves to meet the fiscal deficit but for bank recapitalisation and for meeting poverty alleviation programme defies logic. Under normal circumstances doesn’t the government otherwise spend for these purposes out of its own kitty? Hence dipping into RBI reserves amounts to nothing but monetising the fiscal deficit. Further, a parallel is drawn between the system followed by the RBI and other central banks globally. For example, the US Federal Reserve transfers surplus beyond a threshold limit which is as per the provisions of the Federal Reserve Act and Consumer Protection Act. Similarly, in the UK too, Bank of England and the Treasury have signed an MoU for transfer of surplus funds. But there is no such clause in the RBI Act. Another glaring difference between Indian and global norms relate to the holding structure wherein in other countries banks are mostly privately owned unlike in India. Doesn’t recapitalisation of banks (PSBs) through funds claimed by the government from the RBI amount to rewarding their own inefficiency, with government being a majority stakeholder in PSBs? The present move has emerged out of desperation on the part of the government since it has come under renewed pressure for funds in view of several iterative changes it has brought in GST rates.

Chennai

This refers to ‘New Year resolution: No farm-loan waiver, please’ (January 1). The writer has covered a host of aspects which make Hiware Bazar village a model for the entire country in the present context. Deputy sarpanch Popatrao Pawar’s statement, “…loan waivers don’t help farmers sustain and survive. We just need pure seeds, electricity and a fair price for our produce,” should be an eye-opener for all concerned, from those at NITI Aayog, down to the political/social workers at the lowest level in the villages. Hiware Bazar, as per the report, has a farmer population well aware of essential ‘backward and forward linkages for agricultural projects’ and has, therefore, managed the resources available in the area at optimum levels. Though the same model may not be replicable elsewhere, the approaches to resource mobilisation and project management are universal.

Mumbai

As expected, Awami League, led by the prime minister Sheikh Hasina, scripted a momentous triumph in the Bangladesh general elections by trouncing the united opposition. While Hasina sought mandate on the strength of her notable achievements on the economy and social progress fronts, the opposition coalition led by Kamal Hossain, a close associate of the country’s first prime minister Mujibur Rehman, highlighted Hasina’s oppressive measures with an intent to cripple dissenters. But the voters of Bangladesh had given a thumping majority to Awami League-led Grand alliance. While Hasina had every reason to cheer about the poll outcome, the time has come for her to reach out to the opposition and repair the widening political divisions on the ground.

Sholavandan, TN

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.