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Ban gold imports
High fiscal and current account deficits, a declining growth rate and a currency that has been depreciating are bound to result in high inflation, said K C Chakra-barty (KCC), Deputy Governor, Reserve Bank of India.
KCC PREDICTED AS early as in August 2010 that with such conditions, there is no likelihood of arresting
inflation. Of course, this blunt statement goes against the frequent pronouncements of policy makers.

Sound credentials...

KCC brings with him rich experience in academics as well as in banking. He taught and researched at the Benaras Hindu University and has over three decades of experience in banking that too with major nationalised banks. It includes service at Bank of Baroda, Indian Bank and the Punjab National Bank (he headed the last two as CMD before shifting to RBI). Understandably KCC has rich credentials to caution on monetary policy deficiencies. 

KCC strongly feels that inflation can be controlled only by an iron fist. He pointed out that high inflation is inimical to growth and it also brings along several other problems. He feels leadership should encourage people to work hard and even suggests scaling down of salaries to curb inflation.  

KCC expressed concern over the nation living beyond its means and that this has been impacting on growth. To maintain consistently a growth of over 8 per cent, average productivity should increase across the board. Unfortunately, even the organised sector has been under - performing, he pointed out.  

Why banks sell gold?

KCC has been known for his frank views. He expressed dismay at the country’s fascination for gold: “the country imports $ 60 billion worth of gold annually. Should we continue to do this? Why banks should sell gold coins over the counter? This is not done anywhere else in the world. Can’t we ban gold imports? Of course, there is the fear of smuggling. But how much of gold could be smuggled? Can it be in hundreds of tonnes?” 

Looking at the windfall profits made by the gold business and the dozens of banks and non-banking
finance institutions flourishing on gold loans, such a drastic solution appears overdue.

KCC also condemn banks’ indifference in dealing with mounting NPAs: “look at the paradox: honest and good customers are charged heavily to compensate for the sins of bad ones who contribute to the NPAs. There are not enough efforts on the part of banks to take and manage risks,” he said.  

Mounting NPAs...

KCC pointed to the need for bankers developing more expertise to extend credit to agriculture, micro, small and medium enterprises and other rural customers. And even for setting up small banks that will take care of these specialised tasks. “There is need to open more banks to increase competition and ensure that banking services reach the masses and banks provide access to needed credit,” he said. I remember a statement made by him earlier that banking has been among the most profitable businesses. Rightly, he cautioned that the selection process of the chief executives of the banks needs refinement and revamping. - SV 

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