This refers to the Q&A "We seek more flexibility in priority-sector lending" (March 25) with Gunit Chadha, Co-CEO (Asia Pacific), Deutsche Bank. In one of his responses, Chadha seeks more flexibility in priority-sector lending. It is clear from his suggestion that he prefers indirect lending instead of direct lending to priority sectors. Indirect lending amounts to investments in bonds issued by the National Bank for Agriculture and Rural Development that qualify for meeting priority-sector lending targets. Foreign banks have been given the benefit of indirect lending ever since they entered India. Some foreign banks have played this game and, unfortunately, the banking regulator, the Reserve Bank of India (RBI), complied with their request. However, Indian banks, especially public sector banks, registered a massive rise in their non-performing assets as a result of direct lending. Why this discrimination? Why do foreign banks cite a lack of expertise only when it comes to priority-sector lending? Having tasted the plum of corporate banking, it seems they do not want to get their hands dirty by engaging in priority-sector lending. The RBI, therefore, would do well to refrain from handing out concessions to foreign banks, which have also sought expansion through either the subsidiary route or branches.
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K V Rao Bangalore
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number