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THE TRIBUNE SPECIALS
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B U S I N E S S

Repo rate up by .25 pc
  Y.V. ReddyBank rate, CRR unchanged; personal loans may be expensive 
Mumbai, January 31
Personal and real estate loans as well as credit card withdrawals may become expensive, with the RBI today asking banks to set aside more money to cover risks on advances to these sectors while raising key short-term lending rates to curb inflation. 
                       Y.V. Reddy

Highlights

GDP growth rate for 2005-06 revised
to 9 pc 

New Delhi, January 31
India today revised its economic growth for the fiscal 2005-06 at 9 per cent largely due to a higher output in the farm sector, bringing it closer to China’s sizzling growth.


 


EARLIER STORIES

 
Models display Matsushita Electric's compact digital camera "Lumix DMC-FX30" (top), equipped with a 7.38 mega-pixel CCD image sensor and a 4.6 - 16.4mm/F2.8 - 5.6 zoom lens, equivalent to 28 - 100mm in 35mm camera, and "Lumix DMC-TZ3" (below), equipped with a 8.5 mega-pixel CCD image sensor and a 4.6 - 46mm/F 3.3 - 4.9, equivalent to 28 - 280mm in 35mm camera, in Tokyo on Wedn
Models display Matsushita Electric's compact digital camera "Lumix DMC-FX30" (top), equipped with a 7.38 mega-pixel CCD image sensor and a 4.6 - 16.4mm/F2.8 - 5.6 zoom lens, equivalent to 28 - 100mm in 35mm camera, and "Lumix DMC-TZ3" (below), equipped with a 8.5 mega-pixel CCD image sensor and a 4.6 - 46mm/F 3.3 - 4.9, equivalent to 28 - 280mm in 35mm camera, in Tokyo on Wednesday. — AFP photo

Repo rate hike to curb inflation, says FM
New Delhi, January 31
Endorsing the RBI’s decision to hike overnight lending rate by 0.25 per cent, the government said today this monetary policy move would tame inflation, but not affect India’s growth story.

Ashok Leyland Q3 net up two-fold
New Delhi, January 31
Ashok Leyland today posted nearly a two-fold increase in net profit at Rs 105.25 crore for the quarter ended December 31 as compared to Rs 54.50 crore for the same quarter last year.

Nalagarh Steel to hike capacity
Chandigarh, January 31
Nalagarh Steel Rolling Mills is all set to increase its capacity from 6,000 tonnes per month to 11,000 tonnes by the end of 2007-08 financial year. The company is also aiming at increasing its annual turnover to Rs 2,000 crore during this period.

Canon ordered to pay 34 m yen
Tokyo, January 31
The Tokyo District Court ordered Canon Inc. yesterday to pay 33.52 million yen to a former Canon researcher for inventing technology to prevent images produced by laser printers from deteriorating.

Yes Bank hikes PLR 
Mumbai, January 31
Yes Bank has announced a hike its benchmark prime lending rate (BPLR) by 50 bps with effect from tomorrow.
President of Japan's automaker Mitsubishi Motors Osamu Masuko bows to photographers while introducing fully redesigned Delica D:5 in Tokyo on Wednesday.
President of Japan's automaker Mitsubishi Motors Osamu Masuko bows to photographers while introducing fully redesigned Delica D:5 in Tokyo on Wednesday. — AFP photo

PNB to raise Rs 1,000 cr
New Delhi, January 31
Punjab National Bank (PNB) would raise Rs 1,000 crore through Tier II bonds to fund its growth plan within and outside the country.

Russian nod to 5-yr lock-in period for India-based JVs
Moscow, January 31
Clearing the decks for boosting bilateral economic relations, Russia has agreed to a five-year lock-in period for rupee debt investments in India-based joint ventures.

PHDCCI submits pre-Budget suggestions
Chandigarh, January 31
The PHD Chamber of Commerce and Industry has focused on the elimination of revenue deficit and accelerating economic growth to 9 per cent in the Haryana Budget for 2007-08.

 

 


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Repo rate up by .25 pc
Bank rate, CRR unchanged; personal loans may be expensive 

Mumbai, January 31
Personal and real estate loans as well as credit card withdrawals may become expensive, with the RBI today asking banks to set aside more money to cover risks on advances to these sectors while raising key short-term lending rates to curb inflation.

While borrowing for buying shares too could become costlier, housing loans may not be impacted as they are not touched by the measures announced by the RBI in the third quarter review of monetary policy.

Finance Minister P Chidambaram, too, said housing sector would be insulated from the hike in repo rate and risk weightages.

In the review, RBI increased provisioning requirement for the four sectors to 2 per cent. It means that banks now have to keep 2 paise for every rupee given to these sectors.

Concerned over high inflation rate, RBI Governor Y.V. Reddy announced hike in overnight repo (short-term lending) rate by 0.25 per cent to 7.5 per cent.

A hike in this rate is aimed at increasing the cost of retail and housing loans to prevent overheating in these rapidly growing sectors.

Bankers said on the whole, the policy is dovish and addresses the concerns of inflation. However, there could be a tightening of liquidity leading to rate hikes by some banks.

The objective of the policy was to bring down inflation to 5-5.5 per cent range at the earliest with the medium term goal of 5 per cent, the RBI said.

The Reserve Bank also raised its growth projection for this fiscal to 8.5-9 per cent from 8 per cent, coinciding with revised figures for 2005-06 which put growth rate to 9 per cent against 8.4 per cent estimated earlier. The economy grew by 9.1 per cent in the first half of this fiscal.

The apex bank kept all other key rates unchanged with bank rate and reverse repo rate at 6 per cent and cash reserve ratio (CRR) at 5.5 per cent. It also kept statutory liquidity ratio unchanged at 25 per cent in line with expectations.

The provisioning requirement for residential housing loans remains unchanged at 0.4 per cent for loans up to Rs 20 lakh and 1 per cent beyond Rs 20 lakh.

The RBI also increased the risk provisioning for non- deposit taking large NBFCs to 2 per cent from 0.4 per cent.

The risk weights for banks' exposure to such NBFCs have been raised to 125 per cent from 100 per cent now.

To ensure adequate availability of credit to productive sectors, the risk weight for all other categories of loans will remain unchanged, including farm, SME and industrial loans.

To check flow of NRI deposits to contain liquidity, the RBI reduced the interest rate cap on Non- Resident External rupee account (NRE) and Foreign Currency Non- Resident (FCNR) deposits by 0.5 per cent and 0.25 per cent, respectively.

Banks have been prohibited grant of fresh loans beyond Rs 20 lakh against NRE and FCNR deposits with an advice not to undertake artificial slicing of loan amount to circumvent the ceiling.

While welcoming and supporting recent actions of government to minimise price volatility, the RBI said inflation could be checked through a combination of fiscal, external and supply management policy apart from ongoing monetary measures.

The RBI underlined the need to avoid overheating in real estate, where capital flow was sizeable and contributed to sharp increases in asset prices and greater volatility in financial markets.

However, it said the signs of overheating could be transitional as substantial investment is being accompanied by overall productive increases in the country.

The apex bank wanted commercial banks to recognise that the shortage of SLR securities could constrain their recourse to liquidity adjustment facility (LAF) which can turn adverse in critical times forcing them to resort to uncollatralised exposures and attendant risks.

"Banks should be aware that accessing the RBI's window for funds should be of very temporary period and equilibrating very short term mismatches. The use of such resources for onlending by banks need to be eschewed," it said.

Over the remaining part of the year, the management of liquidity would receive priority in the monetary policy, it said, adding consequent to the tightening of market liquidity, the impact of the policy was expected to be stronger than before.

The central bank could use all policy instruments, including the CRR to ensure the appropriate modulation of liquidity in response to the evolving situation.

However, the apex bank will ensure that liquidity is maintained to meet all legitimate requirement for productive purposes, which was consistent with the objective of price and financial stability. — PTI 

Highlights

Following are highlights of third quarterly review of monetary policy released by the RBI today:

  • Overnight lending rate (repo) up by 0.25 pc to 7.5 pc
  • Consequently, liquidity to tighten to tame inflation
  • Other rates kept unchanged
  • GDP forecast raised to 8.5-9 pc for 2006-07 from 8 pc
  • Inflation to be brought down close to 5-5.5 pc
  • To pursue goal of ceiling on inflation at 5 pc
  • Currently, inflation at 5.95 pc
  • Banks have to keep 2 paise for every Rupee given to real estate sector, capital market, personal loans (excluding housing), against credit cards and to NBFCs
  • Consequently, rates for these loans expected to rise
  • Concerns over international crude prices
  • Liquidity management to receive priority in the remaining part of year
  • Impact of monetary policy expected to be stronger than before as a result of tightening of liquidity
  • RBI to use all policy instruments, including CRR, to ensure appropriate changes in liquidity for evolving situation
  • RBI to ensure that legitimate requirements of liquidity are met
  • High growth, firming up of inflation, coupled with escalating asset prices, tightening infrastructural bottlenecks complicated monetary policy conduct
  • Concerns relating to persistently high credit growth and possible decline in credit quality
  • Risk weight increased to 125 per cent for banks' exposure to NBFCs
  • Banks restrained from granting fresh loans over Rs 20 lakh against rupee and foreign currency deposits of non-residents
  • Interest rate ceiling on non-residents deposits reduced 

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GDP growth rate for 2005-06 revised to 9 pc 
Tribune News Service

New Delhi, January 31
India today revised its economic growth for the fiscal 2005-06 at 9 per cent largely due to a higher output in the farm sector, bringing it closer to China’s sizzling growth.

The revised figures bring the average growth of the Indian economy in the past three years to 8.3 per cent. China's economy grew 10.7 per cent in calendar 2006.

The government had earlier estimated that the economy grew at 8.4 per cent, rising hopes of the economy touching an overall 8 per cent growth in the 10th Five-Year Plan.

Reacting to the revised growth figures, Finance Minister P. Chidambaram said it was UPAGovernment's policy, which promoted investment in the economy, yielding growth of 9 per cent for 2005-06.

The policy of the government has boosted savings and investment and perhaps also pushed industry to be more productive and efficient, he added.

With the revision in the figures by the Central Statistical Organisation (CSO), the GDP growth shows a significant improvement against 7.5 per cent during 2004-05.

According to official figures, the growth rate of 9 per cent in GDP during 2005-06 was achieved due to high growth in agriculture, forestry and fishing, manufacturing, insurance, construction, financing, real estate and business services and transport.

Agriculture grew 6 per cent in the fiscal year ended in March, 2006, compared with an earlier estimate of 3.9 per cent, while the expansion in mining output was revised to 3.6 per cent from 0.9 per cent earlier, the CSO said.

Manufacturing output growth was revised to 9.1 per cent for the year to March, 2006, from 9 per cent earlier.

The per capita income at constant prices (1999-2000) is estimated at Rs 20,734 for 2005-06 as against rs 19,297 in 2004-05, registering growth of 7.4 per cent during the year.

Both savings and investment rates were above 30 per cent of the GDP in 2005-06.

Meanwhile, the gross domestic saving (GDS) accounted for 32.4 per cent of the GDP as against 31.1 per cent.

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Repo rate hike to curb inflation, says FM
S Satyanarayanan
Tribune News Service

New Delhi, January 31
Endorsing the RBI’s decision to hike overnight lending rate by 0.25 per cent, the government said today this monetary policy move would tame inflation, but not affect India’s growth story.

Monetary policy takes some time to work...It would have a favourable impact on bringing down inflation, Finance Minister P Chidambaram told newspersons here.

Hike in provisioning requirement by the RBI for loans to real estate, capital market, personal loans (barring housing) and against credit cards would bring comfort to the house owners, he said.

Pointing to the rising interest rates, the Finance Minister said “Interest rate is a small part of the cost of industry. I hope industry and business will continue to go with their investment plans.”

Calling banks to moderate credit growth, Mr Chidambaram said borrowing requirements of productive sector must be ensured.

The industry chambers generally welcomed the credit policy decision of the RBI even as Assocham, Ficci and PHDCCI felt that the RBI should not have raised the repo rate by 0.25 per cent.

Stating that the RBI Governor Y.V. Reddy has announced a “very pragmatic credit policy”, CII President R Seshasayee said “the measures announced by the RBI would ensure that inflation and inflationary expectations are addressed adequately, while the growth momentum is retained.”

With a 25 basis points increase in the repo rate, the RBI has sent a strong signal of its hawkish position on combating inflation, Mr Seshasayee said.

Mr Seshasayee mentioned that CII has taken note of the tone that the RBI would take swift action to intervene in the event of a situation of excess liquidity emerging.

Ficci said with today’s announcement, the RBI has re-emphasised its stance to maintain the price stability and keep the inflation rate within the realm of 5-5.5 per cent, and also to maintain the credit quality and liquidity condition in the market.

It said, the increase in repo rate will have indirect impact on lending rate which off late have been hardening.

“The ever-increasing lending rates have all the more adverse impact on small and medium enterprises who do not have any other recourse to fund their expansion plans,” it added.

Welcoming the decision of the RBI Governor for not effecting any changes in CRR, reverse repo and bank rate, Assocham President Venugopal N. Dhoot felt that the premier bank should have maintained the status quo in repo rate too.

The PHDCCI welcomed the overall direction of the monetary policy to ensure an interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum.

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Yes Bank hikes PLR 

Mumbai, January 31
Yes Bank has announced a hike its benchmark prime lending rate (BPLR) by 50 bps with effect from tomorrow.

"We are hiking our BPLR from 13.5 per cent to 14 per cent with effect from February 1," Managing Director and CEO Rana Kapoor said here today.

This has been triggered by the RBI’s announcement that it has hiked the repo rate from 7.25 per cent to 7.5 per cent.

Another reason for the move was the increase in provisioning norms while lending to certain sensitive sectors, Mr Kapoor said. — PTI

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PNB to raise Rs 1,000 cr
Tribune News Service

New Delhi, January 31
Punjab National Bank (PNB) would raise Rs 1,000 crore through Tier II bonds to fund its growth plan within and outside the country.

Thebank has also got the Board’s nod to bring down the government’s stake from existing 57.8 per cent to 51 per cent, PNB Chairman and Managing Director S.C. Gupta while releasing the bank’s Q3 results here today.

As the bank planned to open subsidiaries in Canada and the UK and offshore branches in Singapore and Hong Kong, Mr Gupta said the additional money raised would be utilised mainly for the expansion of branches overseas.

On the dilution of the government stake, the PNB chief said the bank was yet to decide about the means of reducing the stake.

The bank had posted a 16 per cent hike in its net profit at Rs 429.87 crore during the third quarter ended December, 2006, as against Rs 370.44 crore during the corresponding period last year.

The total income of the bank rose to Rs 3,271 crore in the quarter, 21 per cent up from Rs 2,698 crore during the corresponding period last year.

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Russian nod to 5-yr lock-in period for India-based JVs

Moscow, January 31
Clearing the decks for boosting bilateral economic relations, Russia has agreed to a five-year lock-in period for rupee debt investments in India-based joint ventures.

Russia and India are close to signing all general letters of exchange concerning India's debt, Russian Deputy Finance Minister Sergei Storchak told mediapersons here today.

The Indian side had asked for the introduction of a lock-in period during which the joint ventures could not be sold, Storchak said, adding that the lock-in period would be for five years.

Storchak said Russia had already signed the letter and India was due to do the same by the end of this week.

India has agreed to the utilisation of this fund by Russia for investments in the Indian economy. Storchak said that since 1993 India has been repaying the Soviet-era debts by transferring Indian rupees to Russian VneshEconomBank account with the Reserve Bank of India.— PTI

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Corporate Results
Ashok Leyland Q3 net up two-fold

New Delhi, January 31
Ashok Leyland today posted nearly a two-fold increase in net profit at Rs 105.25 crore for the quarter ended December 31 as compared to Rs 54.50 crore for the same quarter last year.

The total income (net of excise) increased 48.21 per cent to Rs 1783.94 crore for the third quarter ended December 31 from Rs 1203.64 crore for the corresponding quarter a year ago.

The company has reported a 48 per cent growth in the net sale revenue during the quarter ended December 31 to Rs 1,777.59 crore.

Hero Honda net down

Increased input costs, competitive pressures and discounts dented Hero Honda's margins in the quarter ended December 31, 2006, as the company reported a 20 per cent decline in net profit at Rs 209.1 crore against Rs 261.7 crore in the corresponding quarter last fiscal.

It reported an anticipated slide in profits as its operating margins stood at 11.32 per cent in the third quarter of this fiscal even as net sales moved up by 15 per cent.

Net sales for the company rose by 15 per cent at Rs 2,666 crore in the October-December, 2006, period.

Reliance Comm

Reliance Communications has posted a 198 per cent increase in net profit at Rs 924 crore for the quarter ended December 31.

Revenues for the third quarter jumped by 26 per cent at Rs 3,755 crore as a record 4 million wireless subscriber were added during the same period, the company said.

The third-largest mobile operator in the country reported a strong margin growth across all businesses with EBITDA margin witnessing 5 to 27 per cent growth in personal business (wireless), global business and enterprise business.

EIH Q3 net dips

EIH has posted a decline of 50.93 per cent in net profit at Rs 62.01 crore for the quarter ended December 31as compared to Rs 126.39 crore for the same quarter last year.

The total income increased 23.33 per cent to Rs 278.15 crore for the third quarter of this fiscal from Rs 225.53 crore for the corresponding quarter a year ago.

Engineers India

Engineers India has posted an increase of 57.62 per cent in net profit at Rs 39.88 crore for the quarter ended December 31, as compared to Rs 25.30 crore for the same quarter last year.

The total income decreased 23.48 per cent to Rs 153.90 crore for the third quarter this fiscal from Rs 201.15 crore for the corresponding quarter a year ago, Engineers India said.

The Board has declared an interim dividend at 35 per cent.

HPCL Q3 net up

HPCL has posted a net profit after tax at Rs 407.31 crore for the quarter ended December 31, as compared to net loss of Rs 1077.75 crore for the same quarter last year.

The total income (net of excise) increased 22.61 per cent to Rs 22,396.79 crore for the third quarter ended December 31.

Punjab Tractors

Punjab Tractors Limited has posted a profit before tax (excluding extraordinary income) of Rs 28.9 crore in the third quarter as against Rs 30.9 crore previous year. Profit after tax for the third quarter reached Rs 19 crore as compared to Rs 20.8 crore in the corresponding period last year. The total revenue rose to Rs 263.4 crore as compared to Rs 257.5 crore.

Total revenue (excluding extraordinary income) during the April- December period reached Rs 733.8 crore as against Rs 711.6 crore of same period last year.

The operating profit for April- December period moved up to Rs 95 crore from last year's level of Rs 92.2 crore. The profit before tax (excluding extraordinary income) reached Rs 81.9 crore against Rs 75.5 crore of previous year. — Agencies, TNS

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Nalagarh Steel to hike capacity
Tribune News Service

Chandigarh, January 31
Nalagarh Steel Rolling Mills is all set to increase its capacity from 6,000 tonnes per month to 11,000 tonnes by the end of 2007-08 financial year. The company is also aiming at increasing its annual turnover to Rs 2,000 crore during this period.

This was stated by Managing Director Ravinder Bansal, who was here to launch TMT Steel christened as Dev Bhoomi TMT. “We are planning to invest Rs 15 crore for the expansion of our plant at Nalagarh,” he said.

Since the plant was located in Himachal - a state exempt from paying excise duty, its MS rounds were cheaper by Rs 1,000 per tonne than those prepared by units in other states, including Punjab and Haryana. 

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Canon ordered to pay 34 m yen

Tokyo, January 31
The Tokyo District Court ordered Canon Inc. yesterday to pay 33.52 million yen to a former Canon researcher for inventing technology to prevent images produced by laser printers from deteriorating.

In a suit over the patented technology of the computer printer and camera maker, Kazuo Minoura, 61, demanded Canon pay 1 billion yen to compensate him for inventing the technology.

"The ruling disappointed me as it ordered the company to pay a very low amount," he told a news conference.

Canon also expressed disappointment with the ruling and said the company will consider appealing it. "It is very regrettable that the argument that we have already paid compensation has been rejected," the company said in a statement.

Canon earlier paid 850,000 yen to the researcher to reward him for his role in accordance with its in-house rule on rewards for company employees' inventions. — Kyodo

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PHDCCI submits pre-Budget suggestions
Tribune News Service

Chandigarh, January 31
The PHD Chamber of Commerce and Industry has focused on the elimination of revenue deficit and accelerating economic growth to 9 per cent in the Haryana Budget for 2007-08.

Submitting pre-Budget recommendations to Mr Birender Singh, Finance Minister, Haryana, the PHDCCI said there was buoyancy in tax revenue from VAT, stamp duty and road tax in the current fiscal. It demanded additional funds for developmental projects in infrastructure, healthcare and education sectors.

Mr Vikram Kapur, Chairman, Haryana Committee, PHDCCI, urged Mr Singh to introduce Tax Information Exchange System.

Referring to the four VAT slabs of 4, 8, 12 and 20 per cent on various commodities, Mr Kapur urged the Finance Minister to reduce the VAT rate to an average of not more than 8 per cent. He also urged to exempt canteen services for workmen in industry from VAT.

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BRIEFLY

CPI-IW static
Shimla, January 31
All India Consumer Price Index Number for Industrial Workers (CPI-IW) on base 2001=100 for the month of December, 2006, remained stationary at 127. During December last year, the index recorded decrease of four points in Agra centre, three points in Rangapara-Tezpur, Ludhiana and Jalpaiguri centres, two points in nine centres and one point in 20 centres. — UNI

NTPC Q3 profit up 18 pc
New Delhi, January 31
NTPC Ltd has posted a 18.05 per cent increase in its net profit at Rs 2,103.3 crore for the third quarter ended December 31, 2006, as compared to Rs 1,781.7 crore in the corresponding quarter last year. In the third quarter ended December, 2006, the net sales were recorded at Rs 8,146.8 crore from Rs 6,868.9 crore during the same quarter previous year, with a growth of 18.6 per cent. — PTI

Aptech Q4 net at Rs 1.65 cr
New Delhi, January 31
Aptech Ltd has posted a net profit in the last quarter ended December 31, 2006, against a net loss during the same period last year. The company has reported a net profit of Rs 1.65 crore during the fourth quarter ended December 31, 2006. Aptech's global revenues jumped 31 per cent to Rs 222.04 crore over the same period last year. Aptech posted a global profit after tax of Rs 16.9 crore in 2006. Revenues shot up 85 per cent to Rs 922.67 crore over the previous year. —TNS

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