Apropos the editorial "Signs of normalisation" (June 4), the reduction in the statutory liquidity ratio (SLR) by 0.5 percentage point is not expected to make any immediate impact on credit expansion. Banks currently hold 29 per cent of their net demand and time liabilities in the form of government securities qualifying for SLR, which is above the earlier stipulated SLR of 23 per cent. This can be attributed to not only the banks' concern for growing non-performing assets but also on the muted demand for quality credit. The government now needs to support the Reserve Bank of India (RBI)'s move by presenting a proactive Budget, supporting the inflow of long-term tangible investment into the country. It should also prepare the ground for investments, by removing ambiguities in retrospective tax laws, ushering in disinvestment in key sectors, quickening the approval process for projects and so on. This will revive investor sentiment and lead to increased avenues for lending by banks. The government has made a right move by scrapping the Group of Ministers (GoMs) and Empowered GoMs, which ought to speed up the decision-making process. It also needs to support RBI in fighting inflation, by focusing on measures to reduce food wastage, through improved storage and distribution. The government should also persuade states to modify or abolish archaic acts such as the Agriculture Produce Marketing Committee Act, to prevent hoarding by traders.
V Sridhar Kolkata
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