With reference to "Changing the lending landscape" (August 29), without doubt, several financial sector reforms, structural and in relation to savings instruments and resources management, initiated in recent years by the Reserve Bank of India (RBI) will have long-term positive impact on India's economic growth. The inadequacy of dialogue between the government of India and the RBI and the resultant weaknesses in the measures initiated by the latter will remain an issue for pondering even after Raghuram Rajan leaves Mint Road.
A wholesale revamp of bulk borrowing by both government and corporates and funds management by private and public sector organisations is overdue. The sector-specific or instrument-specific approach to funds management is doing more harm than good to the markets affected.
To restore trust and reduce the damage already done by creating uncertainties in regard to public debt management and funds management by organisations like the Employees' Provident Fund Organisation (EPFO) and Life Insurance Corporation (LIC) by using them as captive source for channelling resources to sectors/projects identified by the government, some quick remedial measures should be considered by the Centre in consultation with the RBI: adjourn the idea of takeover of public debt management by the Centre from the RBI, as this will help in using the RBI's clout to retain government securities - at least in the captive market of banks and financial institutions as hitherto - till a retail market for these instruments is developed; allow organisations like EPFO and LIC to manage their funds professionally with the long-term interests of savers in view; have a relook at the basket of instruments in which banks are allowed to invest statutory liquidity ratio funds.
M G Warrier Mumbai
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