This refers to the article "Selective credit control: Useful tool to curb commodity speculation" (Business Line, August 17). The author's suggestion to the RBI to examine the most recent data collected on commodity advances in Basic Statistical Return 3 and look for any signs of accelerated lendings would be of no significance and would be a waste of resources by the RBI.

Instead, the RBI should devise mechanisms and work with banks in creating a nation-wide warehouse receipt system for financing against stocks. This would benefit the farmers also to take advantage of bank credit to realise better returns against their produce.

Commodity economics works on storage, and storage is a factor of demand and supply. The ability or inability to store (in case of farmers) decides the economic value the holder realises. Any suggestion to get back to a control regime is not welcome.

If we have not heard about any trader hoarding commodities with the help of bank finance in US, it is because there is a fairly well-established warehouse receipt system, established futures exchanges, a conducive forward contracting environment and an efficient statistics department of US Department of Agriculture (USDA) which together empower the farmer to store with the help of bank finance and provide regulators information about the stored commodities.

Instead of thinking about further controls it is time to act on developing systems that would help all sectors of the commodity economy.

Rinsy Ansalam

Dubai, UAE

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