This refers to the editorial "RBI waits for the Budget" (February 4). Reserve Bank of India Governor Raghuram Rajan has presented a sensible credit policy, acknowledging the improvements observed in inflation trend, current account deficit, enhanced forex flows and the need to maintain a stable rupee. Rajan is fully justified for being sceptical and has preferred to wait for further detailed data on the major economic factors and the nuances of the fiscal policy expected in the upcoming Budget, in the background of a not-so-encouraging trend in industrial growth and other macro economic data.
However, the policy has provided for enhanced liquidity in the system to expand credit at reasonable cost, solid improvement in the credit portfolio of banks through better management of bad debts - by allowing the conversion of debt into equity - and reducing the mismatch in the asset-liability management of banks by allowing them to go in for long-term and unbreakable deposits. The enhancement in the liberalised remittances scheme would take care of the additional inflows of forex and help maintain the stability of forex rate.
T V Gopalakrishnan Bengaluru
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