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Letters: Reforms with recap

Governance reforms in all public sector banks will also feature as a big part of the overall plan at face value

Business Standard 

This refers to your editorial “RBI’s justified caution” (December 7). With the Monetary Policy Announcement on December 6 and the media interaction that followed, RBI governor Urjit Patel and his team have given clear signals to the doubting public that this season, RBI has no blurred vision as far as the conduct of monetary policy is concerned. Further, the doubts about banking sector reforms including the focus on governance issues of public sector banks being aired by economists and analysts have been cleared by the assurance that “we don’t sow the seeds of the next boom and bust cycle of lending”.
On recapitalisation, let us take Urjit Patel’s words “Governance reforms in all public sector banks will also feature as a big part of the overall plan” at face value. The observation goes well with the assertion that “The plan will be differentiated across the banks. Recap bonds will be front-loaded for banks that have managed their balance sheet strengths more prudently and can use the injected capital to lend besides providing for legacy asset losses.”

One issue where GOI and RBI need to bring more clarity is about the ‘bail-in” provision contained in the draft Financial Resolution and Deposit Insurance (FRDI) Bill. Beyond the clarification from the finance minister that depositors’ interest will be kept in view, a clear statement that whatever be the legislative changes under consideration, savers’ deposits will continue to be safe with banks may go a long way in closing an unhealthy debate now open in the media.
M G Warrier   Thiruvananthapuram
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First Published: Thu, December 07 2017. 22:32 IST