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Letter to BS: It's necessary to arrest economy from slipping into recession

The cash flows of the various segments of the economy have been extensively impacted by the deadly disease

Business Standard 

COVID-19: Lessons from history

This refers to “COVID: Flattening the (economic cost) curve” (March 19). While the impact of the deadly virus is now not quantifiable because of the related costs to contain the disease and the erosion in the value of the assets of the economy are sharply climbing, it is essential to face the situation to keep the economy from slipping into recession.

In order to combat the accelerating downshift, enormous investments are needed in areas like health care, core industries and agriculture for which availability of capital at a lesser cost is essential. The lending rate of the banking sector is not conducive to promote investment and in fact, the Monetary Policy Committee must look for a more reasonable cut in the repo rate ahead of the bi-monthly meeting.

Supply of institutional credit on liberalised terms, allowing moratorium to borrowers incapable of servicing the debt, extending the timeline for the restructuring of the loans outstanding against the micro, small and medium enterprise borrowers are essential to improve the growth of investment as well as to sustain the quality of the assets. At a time when banks are in crisis because of the poor quality of the assets and aggressive mobilisation of the business by some of the financial institutions without adhering to the ethical and disciplined practices, the situation warrants strengthening the oversights on the banks to sustain the quality of the balance sheet of the lenders.

The cash flows of the various segments of the economy have been extensively impacted by the deadly disease and therefore to enable them to pay the statutory dues, sufficient time has to be provided. This will help them avoid the accumulation of the dues and the resultant litigations.

VSK Pillai, Kottayam

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First Published: Thu, March 19 2020. 22:12 IST