Monday, April 20, 2009
PM Panel pegs growth at over 7% this fiscal
PM Panel pegs growth at over 7% this fiscal
The Financial Express, April 18, 2009, Page 2
Press Trust of India, New Delhi
Prime Minister’s Economic Advisory Council (PMEAC) on Friday said it expects the country’s economy to grow at over 7% in the current fiscal as it has already started showing signs of recovery.
“7% plus is what my 2009-10 overall forecast is...I think it has already started recovering in my own assessment,” PMEAC chairman Suresh Tendulkar said on the sidelines of a conference on broadband here. He further said he expects rebound in the economy after September as the worst was over. “I have been maintaining that the worst is already over, (I expect) good recovery after September,” Tendulkar added.
Asked if the contracting industrial production worried him, he said the revised industrial production numbers were higher than the provisional ones, so it did not bother him much.
Despite three stimulus packages announced by the government, the Indian economy grew by 5.3 % in the third quarter of the last fiscal, its lowest rate in over five years, against a whopping 8.9% a year ago.
In the first nine months of last fiscal, the economy grew by 6.9%. For whole of 2008-09, the advance estimates of Central Statistical Organisation (CSO) pegged the economic growth at 7.1%, which seems a tough task in the wake of dismal industrial growth numbers.
On account of slackening demand hitting Indian trade more than anticipated, PMEAC lowered the country’s growth estimate to 6.5-7% from the earlier estimate of 7.1% for 2008-09. The government came out with three stimulus packages in December, January and in the interim Budget, providing sops to various sectors.
09 to be awful year: IMF chief
09 to be awful year: IMF chief
The Financial Express, April 18, 2009, Corporates & Markets, Section II, Page 2
Lalit K Jha, Washington, Apr 17 (PTI)
Observing that the current economic crisis has hit every nook and corner of the world, the head of the International Monetary Fund on Thursday said 2009 is going to be an awful year for economies across the globe.
"2009 will almost certainly be an awful year... We expect global growth to enter deeply into a negative territory," IMF Managing Director Dominique Strauss-Kahn told reporters in his address to the National Press Club here.
The crisis, which originated in advanced economies and spread like wildfire across the world, Strauss-Kahn said, is now a truly global crisis and nobody is escaping.
"Emerging markets are being hit hard, facing the double punch of a sharp drop in export demand and a sudden stop in capital inflows, and this threatens to undo the impressive gains in growth and convergence achieved over the past decade or so," he said.
"Of possibly even greater concern, the crisis has also arrived on the shores of low-income countries, and threatens to cast millions back into poverty - the human consequences here could be absolutely devastating," the IMF boss observed. PTI
The Financial Express, April 18, 2009, Corporates & Markets, Section II, Page 2
Lalit K Jha, Washington, Apr 17 (PTI)
Observing that the current economic crisis has hit every nook and corner of the world, the head of the International Monetary Fund on Thursday said 2009 is going to be an awful year for economies across the globe.
"2009 will almost certainly be an awful year... We expect global growth to enter deeply into a negative territory," IMF Managing Director Dominique Strauss-Kahn told reporters in his address to the National Press Club here.
The crisis, which originated in advanced economies and spread like wildfire across the world, Strauss-Kahn said, is now a truly global crisis and nobody is escaping.
"Emerging markets are being hit hard, facing the double punch of a sharp drop in export demand and a sudden stop in capital inflows, and this threatens to undo the impressive gains in growth and convergence achieved over the past decade or so," he said.
"Of possibly even greater concern, the crisis has also arrived on the shores of low-income countries, and threatens to cast millions back into poverty - the human consequences here could be absolutely devastating," the IMF boss observed. PTI
RBI likely to impose curbs on amount banks park with it
RBI likely to impose curbs on amount banks park with it
The Financial Express, April 18, 2009, Corporates & Markets, Section II, Page 1
Bank chiefs expect the Reserve Bank of India to put a cap on the extent the banks can park funds in the reverse repo window, as a quantitative measure to direct liquidity to industry on Tuesday. Governor of RBI, D Subbarao, will announce his annual monetary and credit policy for 2009-10 on April 21.
JM Garg, chairman & managing director , Corporation Bank, said he did not expect any cut in cash reserve ratio--the amount the RBI impounds from the commercial banks.
There is enough liquidity in the system, and still credit offtake is at 17% as per RBI data. “People , who were earlier bullish on their business expansion plans, have put their plans on hold,” he said.
According to him there could be some cap on the extent of funds the banks park with RBI. The idea may be to discourage banks to park their fund with the RBI. “In fact, if it happens then it will give a further signal for banks to cut their interest rates,’’ he suggested.
Rana Kapoor, managing director of Yes Bank explained that given the market conditions at present, the real interest need to see a significant reduction in the country.
“I hope, RBI would engineer a CRR change on April 21. Although there is ample liquidity at present, if CRR cut is announced by the regulator, it will invariably stimulate the Indian banking system as funds parked with RBI under CRR requirement do not fetch interest income to the banks,’’ he said.
A significant reduction in the CRR to a low of 3% is needed as the country badly needs significant capital of a longer term nature to be ploughed back into growth, he observed.
Abheek Barua, chief Economist, HDFC Bank said , “We expect the RBI to cut its repo and reverse repo rate as a signaling tool to re-iterate its pro-growth stance. This might not necessarily translate into an immediate easing of deposit and loan rates but the current macro conditions require further reiteration of the RBI’s commitment to growth.
With the reverse repo rate at an all time low of 3.5%, the repo rate at 5% and the CRR at 5%, the room for big-ticket rate cuts is fast shrinking. The emphasis the world over has veered towards managing monetary conditions by controlling the “quantity” of money rather than making direct changes in its price, he explained.
The outlook for growth is deteriorating rapidly while inflationary pressures have receded to give way to concerns over deflation. The monetary transmission mechanism within the Indian economy has so far been somewhat sluggish. Aggressive monetary easing undertaken in the recent past has not translated to a proportional decline either in deposit or lending rates.
The Financial Express, April 18, 2009, Corporates & Markets, Section II, Page 1
Bank chiefs expect the Reserve Bank of India to put a cap on the extent the banks can park funds in the reverse repo window, as a quantitative measure to direct liquidity to industry on Tuesday. Governor of RBI, D Subbarao, will announce his annual monetary and credit policy for 2009-10 on April 21.
JM Garg, chairman & managing director , Corporation Bank, said he did not expect any cut in cash reserve ratio--the amount the RBI impounds from the commercial banks.
There is enough liquidity in the system, and still credit offtake is at 17% as per RBI data. “People , who were earlier bullish on their business expansion plans, have put their plans on hold,” he said.
According to him there could be some cap on the extent of funds the banks park with RBI. The idea may be to discourage banks to park their fund with the RBI. “In fact, if it happens then it will give a further signal for banks to cut their interest rates,’’ he suggested.
Rana Kapoor, managing director of Yes Bank explained that given the market conditions at present, the real interest need to see a significant reduction in the country.
“I hope, RBI would engineer a CRR change on April 21. Although there is ample liquidity at present, if CRR cut is announced by the regulator, it will invariably stimulate the Indian banking system as funds parked with RBI under CRR requirement do not fetch interest income to the banks,’’ he said.
A significant reduction in the CRR to a low of 3% is needed as the country badly needs significant capital of a longer term nature to be ploughed back into growth, he observed.
Abheek Barua, chief Economist, HDFC Bank said , “We expect the RBI to cut its repo and reverse repo rate as a signaling tool to re-iterate its pro-growth stance. This might not necessarily translate into an immediate easing of deposit and loan rates but the current macro conditions require further reiteration of the RBI’s commitment to growth.
With the reverse repo rate at an all time low of 3.5%, the repo rate at 5% and the CRR at 5%, the room for big-ticket rate cuts is fast shrinking. The emphasis the world over has veered towards managing monetary conditions by controlling the “quantity” of money rather than making direct changes in its price, he explained.
The outlook for growth is deteriorating rapidly while inflationary pressures have receded to give way to concerns over deflation. The monetary transmission mechanism within the Indian economy has so far been somewhat sluggish. Aggressive monetary easing undertaken in the recent past has not translated to a proportional decline either in deposit or lending rates.
RBI to withdraw NPA relaxation from July
RBI to withdraw NPA relaxation from July
The Financial Express, April 18, 2009, Page 2
fe Bureau, Mumbai
The Reserve Bank of India (RBI) has informed banks that some of the modifications allowed to facilitate restructuring of non-performing assets(NPA) in view of the ongoing downturn in the Indian economy will be withdrawn from July 1 2009.
“The circulars dated December 8, 2008, January 2, 2009 and February 4, 2009 for restructuring of accounts will cease to operate from July 1, 2009. Thereafter, restructuring of all accounts will be governed only by the provisions of circulars dated August 27, 2008, November 3, 2008 and April 9, 2009.,’’ said RBI on Friday.
RBI has clarified that the cases where the accounts were standard as on September 1, 2008 but slipped to NPA category before 31st March 2009, these can be reported as standard as on March 31, 2009 only if the restructuring package is implemented before 31st March 2009
“All those accounts in case of which the packages are in process or have been approved but are yet to be implemented fully will have to be reported as NPA as on March 31, 2009 if they have turned NPA in the normal course,’’ RBI said.
However, in any regulatory reporting made by the bank after the date of implementation of the package within the prescribed period, these accounts can be reported as standard assets with retrospective effect from the date when the reference was made to the credit debt restructuring (CDR) cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases.
In this regard, it may be clarified that reporting with retrospective effect does not mean reopening the balance sheet which is already finalised; what it means is that in all subsequent reporting, the account will be reported as standard and any provisions made because of its interim slippage to NPA can be reversed.RBI has also asked banks to provide extra information about the application received up to March 31, 2009 for restructuring, in respect of accounts which were standard as on September 1, 2008.
The banks will also furnish proposals approved and implemented as on March 31, 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet along with proposals under process/implementation which turned NPA as on March 31, 2009 but are expected to be classified as standard assets on full implementation of the package.
Meanwhile in another circular RBI has said for determining the amount of unsecured advances for reflecting in the published balance sheet, the rights, licenses, authorisations, etc., charged to the banks as collateral in respect of projects (including infrastructure projects) financed by them, should not be reckoned as tangible security. Hence such advances shall be reckoned as unsecured.
Banks should also disclose the total amount of advances for which intangible securities such as charge over the rights, licenses, authority, etc. has been taken as also the estimated value of such intangible collateral. The disclosure may be made under a separate head in “Notes to Accounts”. This would differentiate such loans from other entirely unsecured loans, RBI said.
The Financial Express, April 18, 2009, Page 2
fe Bureau, Mumbai
The Reserve Bank of India (RBI) has informed banks that some of the modifications allowed to facilitate restructuring of non-performing assets(NPA) in view of the ongoing downturn in the Indian economy will be withdrawn from July 1 2009.
“The circulars dated December 8, 2008, January 2, 2009 and February 4, 2009 for restructuring of accounts will cease to operate from July 1, 2009. Thereafter, restructuring of all accounts will be governed only by the provisions of circulars dated August 27, 2008, November 3, 2008 and April 9, 2009.,’’ said RBI on Friday.
RBI has clarified that the cases where the accounts were standard as on September 1, 2008 but slipped to NPA category before 31st March 2009, these can be reported as standard as on March 31, 2009 only if the restructuring package is implemented before 31st March 2009
“All those accounts in case of which the packages are in process or have been approved but are yet to be implemented fully will have to be reported as NPA as on March 31, 2009 if they have turned NPA in the normal course,’’ RBI said.
However, in any regulatory reporting made by the bank after the date of implementation of the package within the prescribed period, these accounts can be reported as standard assets with retrospective effect from the date when the reference was made to the credit debt restructuring (CDR) cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases.
In this regard, it may be clarified that reporting with retrospective effect does not mean reopening the balance sheet which is already finalised; what it means is that in all subsequent reporting, the account will be reported as standard and any provisions made because of its interim slippage to NPA can be reversed.RBI has also asked banks to provide extra information about the application received up to March 31, 2009 for restructuring, in respect of accounts which were standard as on September 1, 2008.
The banks will also furnish proposals approved and implemented as on March 31, 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet along with proposals under process/implementation which turned NPA as on March 31, 2009 but are expected to be classified as standard assets on full implementation of the package.
Meanwhile in another circular RBI has said for determining the amount of unsecured advances for reflecting in the published balance sheet, the rights, licenses, authorisations, etc., charged to the banks as collateral in respect of projects (including infrastructure projects) financed by them, should not be reckoned as tangible security. Hence such advances shall be reckoned as unsecured.
Banks should also disclose the total amount of advances for which intangible securities such as charge over the rights, licenses, authority, etc. has been taken as also the estimated value of such intangible collateral. The disclosure may be made under a separate head in “Notes to Accounts”. This would differentiate such loans from other entirely unsecured loans, RBI said.
Realty stocks gain ground
Realty stocks gain ground
The Hindu Business Line, April 18, 2009, Page 10
Home buyers waiting for further price correction, say analysts.
S. Shanker, Mumbai
Brushing aside the decline seen on Thursday, realty stocks on the BSE gathered a little steam on Friday.
The shares of most real estate majors were up and many have logged between 28 per cent and 100 per cent gains month-on-month, though they were far from their 52-week highs.
Unitech on Friday gained 21.34 per cent at Rs 52.60 over its previous close of Rs 43.35. There were reports that the cash-strapped company had raised nearly $325 million by selling fresh shares to institutional investors via qualified institutional placement on Thursday. The stock has risen about 102 per cent since March.
Mahindra Lifespaces rose 10.74 per cent to Rs 195.95, over the earlier close of Rs 176.95. The stock has gained about 86 per cent since March.
Gainers
Bangalore-based Puravankara Projects closed 9.73 per cent higher at Rs 58.35. Over the month the scrip has gained 52 per cent.
Parsvnath Developers rose 8.94 per cent at Rs 51.20 on Thursday’s close. The stock has risen nearly 50 per cent compared to its month-ago close.
Phoenix Mills was up 3.47 per cent at Rs 98.35. This is nearly 76 per cent higher than its closing price this day last month. Housing Development and Infrastructure Ltd rose 3.42 per cent at Rs 128.65 over previous close of Rs 124.40. HDIL has gained 82 per cent since March. Omaxe closed at Rs 57.40, up 3.05 per cent over earlier close and 37 per cent higher over the month. Sobha Developers closed at Rs 100, up 2.35 per cent. The stock has gained 28 per cent since March.
The stock of DLF was down 1.75 per cent at Rs 230.55. However, over the month it has gained 44 per cent.
Indiabulls Real Estate closed at Rs 128.80, down 5.05 per cent over Thursday’s close. The stock clocked a 46 per cent gain from its month ago close. Orbit Corporation, down 4.20 per cent, closed at Rs 69.65. The stock gained 52 per cent since March. Akruti City lost 5 per cent to record its 52-week low of Rs 443. The stock is down 72 per cent since March.
Emkay Global research said a recent interaction with brokers and developers on recent launches in the residential segment and the responses from the buyers indicate a consensus that in the last two months volumes have improved due to new project launches at competitive prices. However, they said this could be called a trend reversal (in terms of volumes and not pricing) only if such encouraging volumes continue for the next few quarters.
Emkay said majors such as DLF, Unitech and HDIL have launched residential projects at competitive prices in the last two months. With loan restructuring for most of the companies over, the research report from Emkay said investors will focus on the interest servicing capabilities of the companies.
Motilal Oswal Securities, which tracked the recent realty expo in Mumbai, said home buyers are awaiting further price correction.
Holding Back
The analysts said that over the past four to five months, many developers across Mumbai have reduced their prices by 10-30 per cent and are also open to negotiations. However, responses from home buyers indicate that they continue to hold purchase decisions, awaiting a further price correction.
Most developers are expected to increasingly focus on affordable housing. However, this could lead to severe competition and continued pressure on property prices, which would lead to lower margins for developers.
The Hindu Business Line, April 18, 2009, Page 10
Home buyers waiting for further price correction, say analysts.
S. Shanker, Mumbai
Brushing aside the decline seen on Thursday, realty stocks on the BSE gathered a little steam on Friday.
The shares of most real estate majors were up and many have logged between 28 per cent and 100 per cent gains month-on-month, though they were far from their 52-week highs.
Unitech on Friday gained 21.34 per cent at Rs 52.60 over its previous close of Rs 43.35. There were reports that the cash-strapped company had raised nearly $325 million by selling fresh shares to institutional investors via qualified institutional placement on Thursday. The stock has risen about 102 per cent since March.
Mahindra Lifespaces rose 10.74 per cent to Rs 195.95, over the earlier close of Rs 176.95. The stock has gained about 86 per cent since March.
Gainers
Bangalore-based Puravankara Projects closed 9.73 per cent higher at Rs 58.35. Over the month the scrip has gained 52 per cent.
Parsvnath Developers rose 8.94 per cent at Rs 51.20 on Thursday’s close. The stock has risen nearly 50 per cent compared to its month-ago close.
Phoenix Mills was up 3.47 per cent at Rs 98.35. This is nearly 76 per cent higher than its closing price this day last month. Housing Development and Infrastructure Ltd rose 3.42 per cent at Rs 128.65 over previous close of Rs 124.40. HDIL has gained 82 per cent since March. Omaxe closed at Rs 57.40, up 3.05 per cent over earlier close and 37 per cent higher over the month. Sobha Developers closed at Rs 100, up 2.35 per cent. The stock has gained 28 per cent since March.
The stock of DLF was down 1.75 per cent at Rs 230.55. However, over the month it has gained 44 per cent.
Indiabulls Real Estate closed at Rs 128.80, down 5.05 per cent over Thursday’s close. The stock clocked a 46 per cent gain from its month ago close. Orbit Corporation, down 4.20 per cent, closed at Rs 69.65. The stock gained 52 per cent since March. Akruti City lost 5 per cent to record its 52-week low of Rs 443. The stock is down 72 per cent since March.
Emkay Global research said a recent interaction with brokers and developers on recent launches in the residential segment and the responses from the buyers indicate a consensus that in the last two months volumes have improved due to new project launches at competitive prices. However, they said this could be called a trend reversal (in terms of volumes and not pricing) only if such encouraging volumes continue for the next few quarters.
Emkay said majors such as DLF, Unitech and HDIL have launched residential projects at competitive prices in the last two months. With loan restructuring for most of the companies over, the research report from Emkay said investors will focus on the interest servicing capabilities of the companies.
Motilal Oswal Securities, which tracked the recent realty expo in Mumbai, said home buyers are awaiting further price correction.
Holding Back
The analysts said that over the past four to five months, many developers across Mumbai have reduced their prices by 10-30 per cent and are also open to negotiations. However, responses from home buyers indicate that they continue to hold purchase decisions, awaiting a further price correction.
Most developers are expected to increasingly focus on affordable housing. However, this could lead to severe competition and continued pressure on property prices, which would lead to lower margins for developers.
CLSA buys 1.72 cr Unitech shares
CLSA buys 1.72 cr Unitech shares
The Hindu Business Line, April 18, 2009, Page 10
Our Bureau, Mumbai
Foreign institutional investor CLSA Mauritius Ltd picked up 1.72 crore shares of Delhi-based real estate developer Unitech Ltd at an average price of Rs 51.33 a share, the bulk deal report on NSE showed.
The Unitech shares bought by CLSA were worth Rs 88.29 crore.
The markets were quite volatile on Friday and the Sensex gave up a major part of its early gains of 390 points in a sell off witnessed during the last hour trading.
The Sensex finally closed with a gain of just 75 points at 11,023.
FIIs were net buyers of equities worth Rs 670 crore on Friday according to the provisional data put up by the stock exchanges.
Domestic institutions bought shares worth Rs 182 crore.
The Hindu Business Line, April 18, 2009, Page 10
Our Bureau, Mumbai
Foreign institutional investor CLSA Mauritius Ltd picked up 1.72 crore shares of Delhi-based real estate developer Unitech Ltd at an average price of Rs 51.33 a share, the bulk deal report on NSE showed.
The Unitech shares bought by CLSA were worth Rs 88.29 crore.
The markets were quite volatile on Friday and the Sensex gave up a major part of its early gains of 390 points in a sell off witnessed during the last hour trading.
The Sensex finally closed with a gain of just 75 points at 11,023.
FIIs were net buyers of equities worth Rs 670 crore on Friday according to the provisional data put up by the stock exchanges.
Domestic institutions bought shares worth Rs 182 crore.
No more land purchase: Unitech
No more land purchase: Unitech
Business Standard, April 18, 2009, Page 5
Business Standard, April 18, 2009, Page 5
Unitech’s Karnataka JV in limbo
Unitech’s Karnataka JV in limbo
Business Standard, April 20, 2009, Page 5
Business Standard, April 20, 2009, Page 5
DLF SEZs won’t be cancelled till realtor refunds duty sops
DLF SEZs won’t be cancelled till realtor refunds duty sops
The Economic Times, April 20, 2009, Page Economy, Finance & Markets
Amiti Sen, NEW DELHI
Real estate developer DLF will not be allowed to get its four special economic zones (SEZs) denotified or cancelled till the government carries out inspection of the zones to ensure that all duty exemptions enjoyed by the developer during implementation of the project are refunded. It must also be ensured that there are no units in these zones which could get affected by the denotification, a government official said.
“We have already asked our field organisations to start the inspection process. The Customs department will also carry out its own investigations,” a commerce department official told ET.
DLF recently asked the commerce department to denotify four of its IT/ITES SEZs in Bhubaneswar, Gandhinagar, Kolkata and Sonepat. The company, in an official statement, said the decision to get the zones denotified was due to a slowdown in demand for office space and an overall slump in the IT sector.
According to the commerce department, a developer can get a SEZ denotified as long as it is not operational and there are no units there, provided he refunds all the duty exemptions enjoyed because of the SEZ status.
A SEZ developer is exempted from paying local duties like excise and sales tax on materials purchased from the domestic tariff area (area outside the zones) for building and other activities within the zone, besides state government levies such as stamp duty and value-added tax. The developer is also exempted from paying Customs duty in case he imports inputs. “All these exempted duties have to be refunded to the government in case a SEZ is denotified,” the official said. Once the government officials deputed for the task certify that there are no units in the zones and calculate the duties to be refunded, the denotification can take place.
Interestingly, while the commerce department is of the view that there won’t be a problem in getting the DLF SEZs denotified, the same is not true for the three notified SEZs in Goa which the state government wants to be denotified. The denotification of SEZs has not happened yet as the developers are not in favour of the move and there are several units which have set up operations in these zones.
The Economic Times, April 20, 2009, Page Economy, Finance & Markets
Amiti Sen, NEW DELHI
Real estate developer DLF will not be allowed to get its four special economic zones (SEZs) denotified or cancelled till the government carries out inspection of the zones to ensure that all duty exemptions enjoyed by the developer during implementation of the project are refunded. It must also be ensured that there are no units in these zones which could get affected by the denotification, a government official said.
“We have already asked our field organisations to start the inspection process. The Customs department will also carry out its own investigations,” a commerce department official told ET.
DLF recently asked the commerce department to denotify four of its IT/ITES SEZs in Bhubaneswar, Gandhinagar, Kolkata and Sonepat. The company, in an official statement, said the decision to get the zones denotified was due to a slowdown in demand for office space and an overall slump in the IT sector.
According to the commerce department, a developer can get a SEZ denotified as long as it is not operational and there are no units there, provided he refunds all the duty exemptions enjoyed because of the SEZ status.
A SEZ developer is exempted from paying local duties like excise and sales tax on materials purchased from the domestic tariff area (area outside the zones) for building and other activities within the zone, besides state government levies such as stamp duty and value-added tax. The developer is also exempted from paying Customs duty in case he imports inputs. “All these exempted duties have to be refunded to the government in case a SEZ is denotified,” the official said. Once the government officials deputed for the task certify that there are no units in the zones and calculate the duties to be refunded, the denotification can take place.
Interestingly, while the commerce department is of the view that there won’t be a problem in getting the DLF SEZs denotified, the same is not true for the three notified SEZs in Goa which the state government wants to be denotified. The denotification of SEZs has not happened yet as the developers are not in favour of the move and there are several units which have set up operations in these zones.
Worst of recession is over, say Fed officials
Worst of recession is over, say Fed officials
The Financial Express, April 20, 2009, Page 13
Reuters, Nashville
Top US officials on Saturday offered reassurances that the worst of the economic downturn is likely to be over, helped by unprecedented efforts to keep credit flowing, though the recovery will be slow.
Two Federal Reserve policy-makers, vice-chairman Donald Kohn and New York Fed chief William Dudley, both pointed to signs that measures taken by the US central bank are indeed working to help revive the economy.
And Paul Volcker, a senior economic adviser to the Obama administration and a former Fed chairman himself, said the rate of the economy’s decline is set to slow.
Volcker, who like the other officials spoke at a conference of policy-makers and academics at Vanderbilt University, said, however, that the economy faces a “long slog” toward recovery.
Fed officials often stress that there is a lag before the economy responds to measures taken to support growth, such as interest rate cuts, and that those lag times can vary. Since the financial crisis erupted in 2007 the Fed has slashed its benchmark lending rate from a peak of 5.25%, reaching the current range of zero to 0.25% in December 2008.
The Fed has also created an alphabet-soup of programs to support credit markets and revive lending in different segments, especially home mortgages.
While the central bank’s emergency measures have caused the Fed’s balance sheet to balloon to over $2 trillion, Kohn and Dudley dismissed worries that the measures could lead to inflation down the road, saying they have plenty tools to drain excess cash from the system when necessary. Volcker, known for aggressive interest rate hikes to combat spiraling inflation when he was the Fed chairman in the 1980s, said the unprecedented tumble in economic activity in late 2008 may not have left the United States in a Great Depression but has left it “in a great recession for sure.”
“None of us has seen a decline in economic activity at the rate of speed seen late last year,” said Volcker, who has been enlisted by Obama as part of a heavyweight economic team.
Most economists see the fourth quarter of 2008, when gross domestic product shrank by 6.3%, and the just-ended first quarter of 2009 as the low point.
Kohn stressed that the current recession is “global, and will require a global response.” He said the era of relying on the free-spending US consumer was over and that the phenomenon was “never sustainable.”
Now, “US consumers are pulling back, obviously, and are going to be amassing savings by not spending,” he said.
But even with the United States now in its sixth quarter of recession, Kohn said the central bank’s attempts to heal ailing credit markets and spur an economic recovery have been working gradually.
“The situation in financial markets and the economy would have been far worse if the Federal Reserve hadn’t taken the actions we did,” he said.
The Financial Express, April 20, 2009, Page 13
Reuters, Nashville
Top US officials on Saturday offered reassurances that the worst of the economic downturn is likely to be over, helped by unprecedented efforts to keep credit flowing, though the recovery will be slow.
Two Federal Reserve policy-makers, vice-chairman Donald Kohn and New York Fed chief William Dudley, both pointed to signs that measures taken by the US central bank are indeed working to help revive the economy.
And Paul Volcker, a senior economic adviser to the Obama administration and a former Fed chairman himself, said the rate of the economy’s decline is set to slow.
Volcker, who like the other officials spoke at a conference of policy-makers and academics at Vanderbilt University, said, however, that the economy faces a “long slog” toward recovery.
Fed officials often stress that there is a lag before the economy responds to measures taken to support growth, such as interest rate cuts, and that those lag times can vary. Since the financial crisis erupted in 2007 the Fed has slashed its benchmark lending rate from a peak of 5.25%, reaching the current range of zero to 0.25% in December 2008.
The Fed has also created an alphabet-soup of programs to support credit markets and revive lending in different segments, especially home mortgages.
While the central bank’s emergency measures have caused the Fed’s balance sheet to balloon to over $2 trillion, Kohn and Dudley dismissed worries that the measures could lead to inflation down the road, saying they have plenty tools to drain excess cash from the system when necessary. Volcker, known for aggressive interest rate hikes to combat spiraling inflation when he was the Fed chairman in the 1980s, said the unprecedented tumble in economic activity in late 2008 may not have left the United States in a Great Depression but has left it “in a great recession for sure.”
“None of us has seen a decline in economic activity at the rate of speed seen late last year,” said Volcker, who has been enlisted by Obama as part of a heavyweight economic team.
Most economists see the fourth quarter of 2008, when gross domestic product shrank by 6.3%, and the just-ended first quarter of 2009 as the low point.
Kohn stressed that the current recession is “global, and will require a global response.” He said the era of relying on the free-spending US consumer was over and that the phenomenon was “never sustainable.”
Now, “US consumers are pulling back, obviously, and are going to be amassing savings by not spending,” he said.
But even with the United States now in its sixth quarter of recession, Kohn said the central bank’s attempts to heal ailing credit markets and spur an economic recovery have been working gradually.
“The situation in financial markets and the economy would have been far worse if the Federal Reserve hadn’t taken the actions we did,” he said.
RBI may retain key rates, ask banks to up lending
RBI may retain key rates, ask banks to up lending
The Economic Times, April 20, 2009, Page Economy, Finance & Markets
The Reserve Bank is likely to retain key policy rates in its annual monetary policy to be unveiled on Tuesday and it may also ask banks to step up lending and pass on the benefit of earlier rate cuts announced by the central bank. Earlier this month at a seminar RBI Governor D Subbarao had said, "The response of banking system (to the policy actions) has been positive...But banks are yet to respond as much as warranted by the policy." According to UCO Bank Chairman and Managing Director S K Goel, "I think RBI is unlikely to alter policy rates. It would rather maintain status quo this time."
Lending rates may be reduced by 200 bps
Lending rates may be reduced by 200 bps
The Financial Express, April 20, 2009, Page 12
At a time when the Indian economy is slowing down, the domestic banking industry is under enormous pressure to go out of the way in responding positively to fund growth. That effectively means that banks have to change their mindset and find ways to reduce rates and start corporate and retail lending in a big way. Banks also expect more measures from regulator, Reserve Bank of India (RBI), to boost liquidity and facilitating further reduction in rates.
In an exclusive interview with Hemang Palan & Kumud Das, Rana Kapoor, managing director & CEO, YES Bank, presents and explains his perspective about the situation:
•There is a talk of economic recovery. Do you agree on this ?
The Indian economy is now back on its feet. It’s on an upturn path and is reviving gradually, mainly due to extraordinary and well-timed monetary-cum-fiscal action taken by the Indian government in the past few months. The worst time for the country’s economy is over. I certainly believe that given the market conditions at present, we need to see a significant reduction in real interest rates in the country. I hope that RBI would engineer a CRR change on April 21. Although there is ample liquidity at present, if a CRR-cut is announced by the regulator, it will invariably stimulate the Indian banking system as funds parked with RBI under CRR requirements do not fetch interest income to the banks. Thus such non-earning resources need to be passed back into the banking system either through a market interest rate payable on CRR funds, which could be at least equal to the repo rate or higher, or a significant reduction in the CRR as low as 3%, 2% or even 0% as our country is currently in dire need of a significant capital of a long-term nature to be ploughed back into growth.
•Do you think that currently banks are not willing to lend to the corporate sector?
I do not think that there exists an impasse in the credit growth of the banking system. Today, banks in India are keenly looking at getting back actively and prudently into funding good quality projects. Such a turnaround that is presently being witnessed in the country is fortunately led by the state-owned banks.
The credit offtake of the banking system was virtually frozen in the third quarter of the last fiscal. However in the last quarter of the financial year 2008-09, the banking system could have registered an average credit growth of around 22%-23%. These figures, when made public, are likely to reflect the state-owned banks’ credit growth more than that of the private sector banks during the January-March 2009 quarter.
•What is your bank’s position on credit offtake?
On a year-on-year basis, for the quarter ended March 31, 2009 , YES Bank’s credit offtake rose by over 25%. Our bank’s net interest margin (NIM) in third quarter of the last fiscal - the toughest quarter that I have witnessed till date in my entire banking career in the last 30 years - was 2.8%. In last quarter of the last fiscal, our NIM was 3%. It’s because there is a perceptible and meaningful reduction taking place in cost of funds for the entire Indian banking system.
•Do you see rates falling?
I foresee deposit rates of banking system to go down by 150-200 basis points in the near future in the bandwidth, of 5%-7.5%. The lending rates could correspondingly get reduced by about 200 basis points in the bandwidth, 8.5%-10%. I estimate that the credit offtake of the Indian banking system in the current fiscal could be around 23%. I believe that we will see a GDP growth of around 7% in the current fiscal.
•What are your plans to make YES Bank a bigger bank?
By March 2015, we wish to transform YES Bank into a world-class, best quality bank in India . We want to remain an India-focused knowledge-banking entity. We wish to focus more on promising sectors like agriculture, healthcare, tourism & hospitality, energy, infrastructure, retail, telecom, logistics, aviation, shipping & ports etc to promote our corporate banking model.
Also, we are keen to promote our retail banking model by opening branches in high-growth clusters of the country. Today, we are with 117 branches and 200 ATMs across the country. In the last four years, thus, we have become bigger than the biggest foreign bank that presently operates 90 branches in India.
In the current fiscal, we wish to open 33 new branches. We already hold the regulator’s approval to open 20 new branches in India. By 2015-end, we wish to cross 500 branches in the country. I strongly believe that between 2010-2012, we may acquire at least one bank in southern India to promote our retail banking expansion. The takeover target would have a good deposit base and an excellent regional branch distribution.
•Any other new initiatives you are planning this year ?
For promoting our private equity venture in India , we are very close to inking a $200-million South Asia Clean Energy Fund in partnership with the Global Environment Fund (Washington). We have already binding commitments worth $80 million. The fund is expected to go for its first investment in the country in September 2009. It’s YES Bank’s first PE venture. Also in partnership with Washington-based advisory body Accion which is also sponsored by the IMF and the World Bank, YES Bank is floating an NBFC arm in a bid to service urban slums of Mumbai by September 2009.
•What are your fund raising plans this year?
In the financial year 2008-09, YES Bank raised over Rs 1,000 crore worth capital funds. Our capital adequacy ratio is above 15% at present. It is our intent to raise funds over Rs 500 crore of tier II capital from domestic markets in the next 6-12 months.
•What kind of restructuring of loans have your performed?
We have restructured about 4-5 corporate loans in the recent past. In the current fiscal, we wish to add 1,000 people to our current workforce of about 2,700 employees. This recruitment is likely to happen after September 2009.
We recruited 20 IIM graduates in the last two months, maintaining parity with salary packages that were offered to our bank’s management graduates last year.
•Any large funding you have done in recent times?
We have made a commitment of Rs 175 crore to Tech Mahindra towards the Satyam acquisition through subscription of NCDs. We have recently done a term financing worth Rs 400 crore for Vodafone.
The Financial Express, April 20, 2009, Page 12
At a time when the Indian economy is slowing down, the domestic banking industry is under enormous pressure to go out of the way in responding positively to fund growth. That effectively means that banks have to change their mindset and find ways to reduce rates and start corporate and retail lending in a big way. Banks also expect more measures from regulator, Reserve Bank of India (RBI), to boost liquidity and facilitating further reduction in rates.
In an exclusive interview with Hemang Palan & Kumud Das, Rana Kapoor, managing director & CEO, YES Bank, presents and explains his perspective about the situation:
•There is a talk of economic recovery. Do you agree on this ?
The Indian economy is now back on its feet. It’s on an upturn path and is reviving gradually, mainly due to extraordinary and well-timed monetary-cum-fiscal action taken by the Indian government in the past few months. The worst time for the country’s economy is over. I certainly believe that given the market conditions at present, we need to see a significant reduction in real interest rates in the country. I hope that RBI would engineer a CRR change on April 21. Although there is ample liquidity at present, if a CRR-cut is announced by the regulator, it will invariably stimulate the Indian banking system as funds parked with RBI under CRR requirements do not fetch interest income to the banks. Thus such non-earning resources need to be passed back into the banking system either through a market interest rate payable on CRR funds, which could be at least equal to the repo rate or higher, or a significant reduction in the CRR as low as 3%, 2% or even 0% as our country is currently in dire need of a significant capital of a long-term nature to be ploughed back into growth.
•Do you think that currently banks are not willing to lend to the corporate sector?
I do not think that there exists an impasse in the credit growth of the banking system. Today, banks in India are keenly looking at getting back actively and prudently into funding good quality projects. Such a turnaround that is presently being witnessed in the country is fortunately led by the state-owned banks.
The credit offtake of the banking system was virtually frozen in the third quarter of the last fiscal. However in the last quarter of the financial year 2008-09, the banking system could have registered an average credit growth of around 22%-23%. These figures, when made public, are likely to reflect the state-owned banks’ credit growth more than that of the private sector banks during the January-March 2009 quarter.
•What is your bank’s position on credit offtake?
On a year-on-year basis, for the quarter ended March 31, 2009 , YES Bank’s credit offtake rose by over 25%. Our bank’s net interest margin (NIM) in third quarter of the last fiscal - the toughest quarter that I have witnessed till date in my entire banking career in the last 30 years - was 2.8%. In last quarter of the last fiscal, our NIM was 3%. It’s because there is a perceptible and meaningful reduction taking place in cost of funds for the entire Indian banking system.
•Do you see rates falling?
I foresee deposit rates of banking system to go down by 150-200 basis points in the near future in the bandwidth, of 5%-7.5%. The lending rates could correspondingly get reduced by about 200 basis points in the bandwidth, 8.5%-10%. I estimate that the credit offtake of the Indian banking system in the current fiscal could be around 23%. I believe that we will see a GDP growth of around 7% in the current fiscal.
•What are your plans to make YES Bank a bigger bank?
By March 2015, we wish to transform YES Bank into a world-class, best quality bank in India . We want to remain an India-focused knowledge-banking entity. We wish to focus more on promising sectors like agriculture, healthcare, tourism & hospitality, energy, infrastructure, retail, telecom, logistics, aviation, shipping & ports etc to promote our corporate banking model.
Also, we are keen to promote our retail banking model by opening branches in high-growth clusters of the country. Today, we are with 117 branches and 200 ATMs across the country. In the last four years, thus, we have become bigger than the biggest foreign bank that presently operates 90 branches in India.
In the current fiscal, we wish to open 33 new branches. We already hold the regulator’s approval to open 20 new branches in India. By 2015-end, we wish to cross 500 branches in the country. I strongly believe that between 2010-2012, we may acquire at least one bank in southern India to promote our retail banking expansion. The takeover target would have a good deposit base and an excellent regional branch distribution.
•Any other new initiatives you are planning this year ?
For promoting our private equity venture in India , we are very close to inking a $200-million South Asia Clean Energy Fund in partnership with the Global Environment Fund (Washington). We have already binding commitments worth $80 million. The fund is expected to go for its first investment in the country in September 2009. It’s YES Bank’s first PE venture. Also in partnership with Washington-based advisory body Accion which is also sponsored by the IMF and the World Bank, YES Bank is floating an NBFC arm in a bid to service urban slums of Mumbai by September 2009.
•What are your fund raising plans this year?
In the financial year 2008-09, YES Bank raised over Rs 1,000 crore worth capital funds. Our capital adequacy ratio is above 15% at present. It is our intent to raise funds over Rs 500 crore of tier II capital from domestic markets in the next 6-12 months.
•What kind of restructuring of loans have your performed?
We have restructured about 4-5 corporate loans in the recent past. In the current fiscal, we wish to add 1,000 people to our current workforce of about 2,700 employees. This recruitment is likely to happen after September 2009.
We recruited 20 IIM graduates in the last two months, maintaining parity with salary packages that were offered to our bank’s management graduates last year.
•Any large funding you have done in recent times?
We have made a commitment of Rs 175 crore to Tech Mahindra towards the Satyam acquisition through subscription of NCDs. We have recently done a term financing worth Rs 400 crore for Vodafone.
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