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B U S I N E S S

Monetary Policy
Repo, reverse repo rate cut by 0.25 bps

Mumbai, April 21
Duvvuri Subbarao The RBI has effected a marginal reduction in repo and reverse repo rates. Releasing the bank’s annual policy statement for the financial year 2009-10, RBI Governor D Subbarao announced that repo and reverse repo rates would be cut by 25 basis points each while the cash reserve ratio of banks would remain unchanged.

Rate cuts will boost demand: Realty players
New Delhi, April 21
Realty developers and property consultants today hailed the RBI's decision to further cut short term lending and borrowing rates saying that the move would help boost demand in the housing sector.

Financial sector under stress: IMF
Washington, April 21
As the world's current economic crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging markets, International Monetary Fund has said the global financial system remains under severe stress.





EARLIER STORIES



A visitor poses for a photo on a Harley Davidson Fat Boy motorcycle at the Shanghai International Auto show
A visitor poses for a photo on a Harley Davidson Fat Boy motorcycle at the Shanghai International Auto show on Tuesday. Top automakers projected sales growth of up to 10 per cent this year in China, but this lone bright spot among major car markets is also producing ambitious potential rivals to the industry's main players. — Reuters

UK slips into deflation
London, April 21
The UK has slipped into deflation for the first time in nearly 50 years, as the country's Retail Price Index saw a negative growth of 0.4 per cent in March. The British economy reeling under the financial turmoil had seen a RPI of zero in February.

Pandit's future in Citi hangs in balance
London, April 21
Citigroup chief Vikram Pandit will try to convince investors that the financial services major is on a recovery path, following fresh concerns about his future in the company, a media report said.

A model poses with jewellery at the launch of a jewellery store in New Delhi
A model poses with jewellery at the launch of a jewellery store in New Delhi on Tuesday. Gitanjali group and Minerals and Metals Trading Corporation (MMTC) together launched ‘Shuddhi-Sampurna Vishwas’, a chain of stores retailing hallmarked and certified gold and diamond jewellery. Tribune photo: Manas Ranjan Bhui

12 more Kingfisher pilots quit
Mumbai, April 21
On the heels of about a dozen pilots quitting Kingfisher Airlines, 12 more have put in their papers at the Vijay Mallya-run air-carrier.

Renault defers car launch plans in India
New Delhi, April 21
French auto major Renault has put on hold indefinitely its plans to introduce its cars in the Indian market from the upcoming Chennai plant on account of global slowdown, which has affected the firm's worldwide operations.

Nooyi ranks 4th on Fortune Women CEOs list
Washington, April 21
The Fortune 500 may be dominated by male CEOs, but Indra Nooyi, Indian American CEO of Pepsico, is listed fourth among "15 women (who) show what it takes to lead" some of the America's biggest companies.

RPower ties up funds for Sasan project
Mumbai, April 21
Anil Ambani group company Reliance Power today announced that it has tied up Rs 14,500-crore debt for its 3,960 MW Sasan Ultra Mega Power Project. In a filing to stock exchanges, Reliance Power said, "Sasan Power Ltd, a 100 per cent subsidiary of the company.





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Monetary Policy
Repo, reverse repo rate cut by 0.25 bps
Shiv Kumar
Tribune News Service

Mumbai, April 21
The RBI has effected a marginal reduction in repo and reverse repo rates. Releasing the bank’s annual policy statement for the financial year 2009-10, RBI Governor D Subbarao announced that repo and reverse repo rates would be cut by 25 basis points each while the cash reserve ratio of banks would remain unchanged.

Following the cuts, the repo rate stands at 4.75 per cent while the reverse repo rate stands at 3.25 per cent.

The RBI noted that its efforts under the monetary policy in 2009-10 would be to ensure a policy regime that enables credit expansion at viable rates while preserving credit quality so as to support the return of the economy to a high growth path.

The apex bank noted that India too has suffered the impact of the global financial crisis to degree far higher than expected. “The extent of impact has caused dismay, mainly on two grounds: first, because our financial sector remains healthy, has had no direct exposure to tainted assets and its off-balance sheet activities have been limited; and second, because India’s merchandise exports, at less than 15 per cent of the GDP, are relatively modest,” it said.

The RBI noted that the immediate challenges before it included supporting the drivers of aggregate demand to enable the economy to return to its high growth path, boosting the flow of credit to all productive sectors of the economy, ensuring an orderly withdrawal of the large liquidity injected in the system since September 2008 by the RBI to support the economy's productive requirements; and the continued challenge of preserving the stability of our financial system drawing from the lesson of the global crisis.

Having reduced key rates, the RBI is now leaning on banks to reduce deposit and lending rates as well. “Banks have told us of the constraints they face in further downward adjustment of deposit and lending rates….some of the banks’ apprehensions are valid and some not. Within the policy rate adjustment already effected by the Reserve Bank, there is scope for banks to further reduce lending rates so as to ensure credit flow for all productive economic activity,” RBI stated and asked banks to pass on the benefits of lower interest rates to their customers.

Policy changes

While noting the inherent strengths of the Indian banking system, the RBI said its Committee on Financial Sector Assessment (CFSA) had undertaken a comprehensive assessment of the Indian financial sector and had made several recommendations. Subbarao said the RBI would set up a working group to implement the recommendations of the CFSA.

Among the suggestions to be implemented would include a review of the present BPLR system to make credit pricing more transparent; and payment of interest on savings bank accounts on a daily product basis with effect from April 1, 2010.

Subbarao added that the RBI was looking at measures relating to financial markets, including further liberalisation of the FCCBs buyback policy; extension of the relaxation on the all-in-cost ceilings for ECBs up to December 31, 2009. The RBI was also mulling extension of the special refinance facility and term repo facility and increased limit for export credit refinance for banks up to March 31, 2010.

Foreign banks policy

RBI in its policy said it would not hurry with the proposal to liberalise operation of foreign banks in the country in the wake of the global financial meltdown. The existing policy would continue, RBI said.

Growth forecast

The RBI policy statement also forecast FY10 GDP growth at 6 per cent while FY10 inflation was seen at 4 per cent by March-end. The regulator also projected credit growth and deposit growth at 20 per cent and 18 per cent, respectively.

Bankers cautious

Meanwhile, the banking industry and analysts have been cautious in their reactions to the RBI’s policy statement.

“Credit growth by banks has witnessed substantial moderation as per the latest available estimates. Moreover, despite a 300 bps reduction in repo rate by the RBI till date, the reduction in BPLRs has been in the range of 50-150 bps only. This implies that the monetary transmission mechanism has been weak and therefore, these rate cuts translating into demand stimulation remains a concern,” said Yashika Singh, head economic analysis, Dun & Bradstreet India.

Others were even skeptical of the 6 per cent growth target set by the RBI. Robert Prior Wandesforde, senior Asian economist, HSBC Holdings, felt that the market estimated GDP growth in FY 10 at 5 per cent. He expected interest rates to fall and a sharp decline in the Consumer Price Index.

Industry wants more

However, industry has been asking for more cuts. "A deeper cut in repo and reverse repo rates by at least 50 basis points would have been appropriate as the cost of credit is still high," CII Director-General Chandrajit Banerjee said in a statement.

Assocham president Sajjan Jindal, too, echoed Banerjee’s views and called for prime lending rates of banks to be lowered.

Ficci noted that PLRs of commercial banks had fallen by just 150 basis points as against a fall of 400 basis points in the repo rates in recent months. Industry has also welcomed the increase in the buy-back limit on FCCBs to $100 million from $50 million.

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Rate cuts will boost demand: Realty players

New Delhi, April 21
Realty developers and property consultants today hailed the RBI's decision to further cut short term lending and borrowing rates saying that the move would help boost demand in the housing sector.

They, however, demanded lending institutions should respond positively to the RBI's move by providing loans to customers as well as industry at more cheaper rates.

"The move (cut in policy rates) will have a direct impact on the housing mortgage rates... cut in home loans will surely have a positive impact on the housing sector," real estate consultant Cushman & Wakefield Executive Managing Director (South Asia) Sanjay Verma said.

At present, the demand in the residential sector is soft, he said, adding "there will hardly be any impact on the retail and office segment".

Reacting to the development, Parsvnath Developers chairman Pradeep Jain said, "I welcome the RBI's step to further cut repo and reverse rate. Now the onus lies on the banks to facilitate consumer borrowing through lowering the prime lending rates."

The public-sector banks and financial institutions were not cutting interest rates as required, Jain said.

Pointing out that banks and financial institutions are investing money in government securities and not providing loans to end-users and industry, he said: "We need some guidelines from RBI so that financial institutions and banks reduce rate of interest." "Home loans should be provided at six per cent, while banks should lend us at below 12 per cent," he suggested. National Capital-based developer Omaxe CMD Rohtas Goel hoped that the cuts in lending and borrowing rates would revive the market.

"This step might have a marginal impact in the immediate term on real estate sector. However the same will be visible only in coming 3-4 months," he added. — PTI

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Financial sector under stress: IMF

Washington, April 21
As the world's current economic crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging markets, International Monetary Fund has said the global financial system remains under severe stress.

Shrinking economic activity has put further pressure on banks' balance sheets as asset values continue to degrade, thus, threatening their capital adequacy and further discouraging fresh lending, the IMF said in its latest Global Financial Stability Report released on Tuesday.

"Thus, credit growth is slowing, and even turning negative, adding even more downward pressure on economic activity," it said, adding substantial private sector adjustment and public support packages are already being implemented and are contributing to some early signs of stabilisation.

Still, further decisive and effective policy actions and international coordination are needed to sustain this improvement, to restore public confidence in financial institutions, and to normalise conditions in markets, the IMF said.

The key challenge, the report said, is to break the downward spiral between the financial system and the global economy. "Promising efforts are already under way for the redesign of the global financial system that should provide a more stable and resilient platform for sustained economic growth," the IMF report said.

To mend the financial sector, policies are needed to remove strains in funding markets for banks and corporate, repair bank balance sheets, restore cross-border capital flows (particularly to emerging market countries), and limit the unintended side effects of the policies being implemented to combat the crisis, it said.

International commitment and determination to address the challenges posed by the crisis are growing, as displayed by the outcome of the G-20 summit in early April, the report said.

According to the report, a wide range of non-banking financial institutions has come under strain during the crisis as asset prices have fallen. — PTI

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UK slips into deflation

London, April 21
The UK has slipped into deflation for the first time in nearly 50 years, as the country's Retail Price Index saw a negative growth of 0.4 per cent in March. The British economy reeling under the financial turmoil had seen a RPI of zero in February.

"RPI inflation slowed to -0.4 per cent in March, that is a fall of 0.4 per cent on the year, compared with 0.0 per cent in February," UK Office for National Statistics said in a statement today.

The RPI has fallen into the negative territory for the first time since 1960. Deflation is broadly defined as general fall in prices due to slackening demand. According to the statement, there was a large downward pressure from housing with the main effects coming from house depreciation, mortgage interest payments and, to a lesser extent, buildings insurance.

With the Bank of England bringing down the rates in recent months to boost the nation's economy, the mortgage interest payments have also fallen. In March, the Consumer Price Index (CPI) annual inflation — the government's target measure — dropped to 2.9 per cent against 3.2 per cent in February. — PTI

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Pandit's future in Citi hangs in balance

London, April 21
Citigroup chief Vikram Pandit will try to convince investors that the financial services major is on a recovery path, following fresh concerns about his future in the company, a media report said.

"Vikram Pandit, Citigroup's chief executive, will strive to convince investors that the company is on the road to recovery amid fresh questions over his future at the financial group," the Financial Times said in a report.

Ahead of Citi's annual investor meeting scheduled for today, it has emerged that senior officials at the Federal Deposit Insurance Corporation (FDIC) privately discussed who might replace Pandit if the bank needed more government aid, the report noted.

Quoting a person familiar with the matter, the report said, "It is unthinkable that Vikram could stay on if Citi requires more federal funds. It is prudent to be thinking about different scenarios." The FDIC is only one of the regulators, which has a say on whether Pandit should step down if the government bails out Citi for the fourth time in six months following completion of the "stress test" of its health, the daily said.

Any decision on Citi's leadership would be led by the Treasury, which is about to take a 36 per cent stake in the firm and would sanction further capital injections, it added. — PTI

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12 more Kingfisher pilots quit

Mumbai, April 21
On the heels of about a dozen pilots quitting Kingfisher Airlines, 12 more have put in their papers at the Vijay Mallya-run air-carrier.

"Twelve more pilots have put in their papers and will soon be joining the Gulf-based airline Qatar Airways," a Kingfisher Airlines' official told PTI here. About 12 pilots had resigned earlier to join other domestic air-carriers, the official said.

Though Qatar Airways has given job offer letters to 14 pilots from the airline, two have not made up their mind on quitting as they are already flying wide-body aircraft, the official said.

These pilots are supposed to join Qatar Airways by June 8, the official said.

However, these pilots do not come under the ambit of the civil aviation requirement of 2005, which makes it mandatory for pilots to give six months' notice prior to leaving jobs.

"The 2005 (requirement) is applicable to only those pilots who join domestic airlines. In the case of overseas carriers, one-month notice is sufficient," the official said.

In addition, an equal number of pilots are waiting in the wings to hop on to the Gulf-headquartered airline, which is expected to take a final call on their candidature soon, the official said. — PTI

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Renault defers car launch plans in India

New Delhi, April 21
French auto major Renault has put on hold indefinitely its plans to introduce its cars in the Indian market from the upcoming Chennai plant on account of global slowdown, which has affected the firm's worldwide operations.

"We have indefinitely put on hold our product plans...it is because of slowdown that has affected us globally," a senior Renault India official told PTI.

The company, which had already stopped hiring for production activities in its upcoming Chennai facility, is waiting for market conditions to improve. When contacted, a Renault India spokesperson said, "The construction of the plant is going on, but we have frozen our product plans due to downturn in the global economy.

"However, we have left our product plan at such a stage that whenever we want to defreeze it, without loss of any time we can do (that) and ramp up the production." While investment for construction of the plant was going on, it has been put on hold on product plans, he added.

Renault India had last year announced plans to invest Rs 4,500 crore over a period of seven years to produce four lakh cars annually from the Chennai plant in alliance with Japanese firm Nissan. — PTI

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Nooyi ranks 4th on Fortune Women CEOs list

Washington, April 21
The Fortune 500 may be dominated by male CEOs, but Indra Nooyi, Indian American CEO of Pepsico, is listed fourth among "15 women (who) show what it takes to lead" some of the America's biggest companies.

Fortune 500 Women CEOs listing of the US business magazine notes that since becoming CEO in 2006, Nooyi, 53, has grown the company's top line-revenue from 10 per cent in 2008 to $43.3 billion - and raised its profile in some goodwill-engendering arenas.

Nooyi, who gets $13.4 million in compensation, has pushed PepsiCo to target health-conscious and female consumers, resulting in such new products as Smartfood's low-fat popcorn clusters, low-calorie Trop 50, and Starbucks Frappuccino Lite. — IANS

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RPower ties up funds for Sasan project

Mumbai, April 21
Anil Ambani group company Reliance Power today announced that it has tied up Rs 14,500-crore debt for its 3,960 MW Sasan Ultra Mega Power Project.

In a filing to stock exchanges, Reliance Power said, "Sasan Power Ltd, a 100 per cent subsidiary of the company, has executed financing agreements for the 3,960 MW pit-head coal-based Sasan UMPP located at Singrauli in Madhya Pradesh." This is the largest debt from domestic banks and institutions raised for any project among any industry in the country, company officials said. — PTI

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BRIEFLY


Toyota Motor's cars are displayed at its dealers shop in Hiratsuka, nearby Tokyo
Toyota Motor's cars are displayed at its dealers shop in Hiratsuka, nearby Tokyo on Tuesday. Toyota Motor Corp will produce about 6.2 million vehicles globally in the business year to March 2010, a newspaper reported, down more than 12 per cent amid a global sales slump and helping send its shares skidding over 4 per cent. — Reuters

Hero Honda Q4 net up 35 pc
New Delhi:
Riding on robust demand from rural and semi-urban areas, the country’s largest two-wheeler maker, Hero Honda, on Tuesday posted a 34.64 per cent jump in its net profit at Rs 402.17 crore for the quarter ended March 31, 2009, against Rs 298.70 crore in the year-ago period. For the quarter ended March 31, net sales rose 22.35 per cent to Rs 3,411.84 crore from Rs 2,788.65 crore of the same quarter a year ago, the company said, while also declaring a dividend of Rs 20 per share for the FY'09. — PTI

Nod to Satyam from Euronext Amsterdam to delist ADS
Hyderabad:
Satyam Computer Services on Tuesday said the delisting of the company's American Depository Shares from NYSE Euronext has been approved. "On April 17 Euronext Amsterdam NV approved the company's application for delisting from NYSE Euronext, the regulated market of Euronext Amsterdam, of its American Depository Shares (ADS)," the company said. — PTI

Nepal to resume direct flights to Mumbai
Kathmandu:
Nepal's tourism ministry has announced direct Kathmandu-Mumbai flights from May 1. The state carrier, Nepal Airlines, will now make the trip twice a week, on Mondays and Fridays. A two-way ticket will cost NRS 20,000 ($250) exclusive of taxes while for the first three months the airline is offering a discount of NRS 2,000. — IANS

Suzlon posts net loss
New Delhi:
Suzlon Energy on Tuesday said it has posted a net loss of Rs 52.3 crore for the nine-month period ending December 31, 2008, against a net profit of Rs 565.28 crore in the year-ago period. However, the company's total income nearly doubled to Rs Rs 17,499.2 crore from Rs 8,924.3 crore during the same period, Suzlon said in a regulatory filing to the BSE. — PTI

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