Letters to the editor

By: | Updated: June 24, 2016 7:01 AM

With reference to the well-timed edit “Careful with RBI’s equity” (FE, June 22), it’s extremely hard to believe that this cash starved government is hell bent to set a totally wrong precedent by eyeing even the Reserve Bank of India’s...

Government’s equity play

With reference to the well-timed edit “Careful with RBI’s equity” (FE, June 22), it’s extremely hard to believe that this cash starved government is hell bent to set a totally wrong precedent by eyeing even the Reserve Bank of India’s equity capital base so as to capitalise the public sector banks which have developed a habit of remaining in the virtual financial ICU. Needless to say, no amount of financial doses would be able to retrieve them from their chronic cashless ventilators as the extant situation is a creation of their own. The editorial has quite aptly clarified the intent and purpose of maintaining the Currency and Gold Revaluation Account and Contingency and Asset Development Funds among others by the RBI. It also brings home one of the most vital points that in the case RBI makes losses in currency and bond markets, having a big cushion always helps. Moreover, this view gains more prominence as India has not so far opted for the full convertibility on the capital account. But if the govt still goes ahead with its out of sync plan to tinker with the central bank’s well placed balance sheet it would simply amount to robbing Peter to pay Paul which can’t be endorsed at all by any rational thinking and least by the prudential banking norms. In fact, if one goes by the timings of this move there appears to be something more than meets the eye as the outgoing Governor of RBI Raghuram Rajan has been totally against it.

Kumar Gupt

Panchkula, Haryana

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