Monday, February 1, 2010
Monetary policy review indicates economy on growth path
Monetary policy review indicates economy on growth path
Economic Times, Financial Times, January 31, 2010, Page 1
Vikas Agarwal, ET Bureau
The Reserve Bank of India (RBI) announced a 75 basis points (0.75 percent) hike in the cash reserve ratio (CRR) in its policy review on Friday last. The RBI has kept other policy levers -repo rate, reverse repo rate and bank rate unchanged.
This means the banks will have to keep more in deposit with the RBI. Hence, it will result in drawing out around Rs 36,000 crores from the system.
The RBI's move has come as an unpleasant surprise for the markets as most analysts and fund houses were expecting a 50 basis points hike in the CRR as against the 75 announced.
These are some of the significant aspects of this move:
Impact on liquidity
At present, the domestic economy is dealing with a situation of excess liquidity. Liquidity has gone up due to funds coming in from foreign investors.
This excess liquidity is one of the reasons for the higher inflation, and a hike in the CRR will help in drawing out some of the excess liquidity from the system, and hence in maintaining a balance.
Impact on inflation
The inflation rate has been rising sharply since the last few months. The main reasons that contribute to a higher inflation rate are higher prices of food articles, more liquidity in the system and the lower base effect of last year. This move by the RBI will not have much of an impact on the supply-driven food price inflation.
Also, nothing can be done about the lower base effect of last year. However, it will contain the price rise due to excess money in the system (demand pull inflation).
The RBI has also hiked its expected inflation target for the end of this fiscal year (March 2010) from 6.5 percent to 8.5 percent. This indicates that the RBI feels the CRR hike alone cannot control inflation completely. However, it will help in moderating it.
Impact on credit off-take
The credit off-take in the retail category was quite low. It has picked up slightly during the last couple of months due to the festival season and a number of attractive offers floated by banks.
The hike in the CRR will have some effect on credit growth. The RBI has lowered its credit growth forecast from 18 to 16 percent, in line with expectations.
Impact on interest rates
The hike in the CRR will leave less money with bank to lend. Therefore, indirectly, their cost of funds goes up and there is a case to increase the interest rates.
However, the lower credit offtake and excess liquidity in the system could work in favour of keeping the rates unchanged in the retail loan segment. Many banks have already announced that they will not increase the rates, and will maintain them at the current levels.
However, in the light of this CRR hike, the process of fresh lending is expected to further tighten, and interest rates may go up in the medium term, if certain parameters change further.
Indicators
In this monetary policy review, the RBI has given a clear signal that the domestic economy is back on the growth path. Hence the moves to reverse the expansionary policy stand, which was more-suited for the crisis kind of situation prevalent earlier.
The RBI has started the tightening in order to prevent the economy from overheating. The RBI has also revised its financial year 2011 GDP growth forecast upwards from six to 7.5 percent.
Economic Times, Financial Times, January 31, 2010, Page 1
Vikas Agarwal, ET Bureau
The Reserve Bank of India (RBI) announced a 75 basis points (0.75 percent) hike in the cash reserve ratio (CRR) in its policy review on Friday last. The RBI has kept other policy levers -repo rate, reverse repo rate and bank rate unchanged.
This means the banks will have to keep more in deposit with the RBI. Hence, it will result in drawing out around Rs 36,000 crores from the system.
The RBI's move has come as an unpleasant surprise for the markets as most analysts and fund houses were expecting a 50 basis points hike in the CRR as against the 75 announced.
These are some of the significant aspects of this move:
Impact on liquidity
At present, the domestic economy is dealing with a situation of excess liquidity. Liquidity has gone up due to funds coming in from foreign investors.
This excess liquidity is one of the reasons for the higher inflation, and a hike in the CRR will help in drawing out some of the excess liquidity from the system, and hence in maintaining a balance.
Impact on inflation
The inflation rate has been rising sharply since the last few months. The main reasons that contribute to a higher inflation rate are higher prices of food articles, more liquidity in the system and the lower base effect of last year. This move by the RBI will not have much of an impact on the supply-driven food price inflation.
Also, nothing can be done about the lower base effect of last year. However, it will contain the price rise due to excess money in the system (demand pull inflation).
The RBI has also hiked its expected inflation target for the end of this fiscal year (March 2010) from 6.5 percent to 8.5 percent. This indicates that the RBI feels the CRR hike alone cannot control inflation completely. However, it will help in moderating it.
Impact on credit off-take
The credit off-take in the retail category was quite low. It has picked up slightly during the last couple of months due to the festival season and a number of attractive offers floated by banks.
The hike in the CRR will have some effect on credit growth. The RBI has lowered its credit growth forecast from 18 to 16 percent, in line with expectations.
Impact on interest rates
The hike in the CRR will leave less money with bank to lend. Therefore, indirectly, their cost of funds goes up and there is a case to increase the interest rates.
However, the lower credit offtake and excess liquidity in the system could work in favour of keeping the rates unchanged in the retail loan segment. Many banks have already announced that they will not increase the rates, and will maintain them at the current levels.
However, in the light of this CRR hike, the process of fresh lending is expected to further tighten, and interest rates may go up in the medium term, if certain parameters change further.
Indicators
In this monetary policy review, the RBI has given a clear signal that the domestic economy is back on the growth path. Hence the moves to reverse the expansionary policy stand, which was more-suited for the crisis kind of situation prevalent earlier.
The RBI has started the tightening in order to prevent the economy from overheating. The RBI has also revised its financial year 2011 GDP growth forecast upwards from six to 7.5 percent.
Interest rates expected to hold steady in near term
Interest rates expected to hold steady in near term
Economic Times, Financial Times, January 31, 2010, Page 3
There is adequate liquidity and interest rates will not move in the near future, says Ashish Gupta
The stock markets were keenly following the Reserve Bank of India (RBI) for moves to reign in inflation and ensure growth. This was for the simple reason that the inflation rate has been rising consistently. Interest rates and credit are important constituents for industry. Corporate performance is to a great extent tied up with the availability of credit and the cost at which it is available. Inflation is a major concern.
So, the RBI had the tough task of balancing growth and liquidity. In the credit policy review it has left its short-term interest rates unchanged, but raised the cash reserve requirements of banks by a higher-than-expected 75 basis points, to be implemented in two phases. It also warned of rising inflation. The RBI has increased the cash reserve ratio (CRR) by 75 basis points as against market expectation of 50. It has clearly indicated its intention to control inflation.
The RBI said it will anchor inflation expectations and keep a vigil on the trends in inflation, and be prepared to respond swiftly and effectively through policy adjustments as warranted. Further, the RBI will actively manage liquidity to ensure that credit demands of productive sectors are adequately met. It will also maintain an interest rate environment consistent with price and financial stability, and in support of the growth process.
The RBI has also hiked its forecast for GDP growth in the current year to 7.5 percent, from an earlier target of six percent, and said the current rate of growth is likely to be sustained in the financial year that ends March 2011.
The RBI had earlier pegged the growth rate at six percent and inflation at 6.5 percent. Assuming a near-zero growth in agricultural production and continued recovery in industrial production and services sectors, the baseline projection for gross domestic product growth for 2009-10 is now raised to 7.5 percent. Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the baseline projection for wholesale price inflation for end-March 2010 is now raised to 8.5 percent. On the assumption of normal monsoon and global oil prices remaining around the current level, it is expected inflation will moderate from July.
As an outcome, banks will start exercising a little more caution keeping in mind the fact that the RBI is so concerned about inflation. Banks are not expected to hike the rates immediately because there is excess liquidity in the system. The industry does not foresee interest rates going up in the near future because of the expected inflows and the liquidity condition at present.
The fact that interest rates have not been increased will continue to spur demand. There was a lot of anxiety on whether the government will pull back the various stimulus measures. The fact that interest rates have not been changed will now put the industry at ease.
The net impact on stock markets is expected to be neutral in the near term. With the raised GDP growth projections, the industry demand is expected to grow. Also, as the interest rates are expected to remain at their present levels in the near future, business plans of corporates will not be affected adversely.
All this may not impact the stock markets negatively. Especially so because the interest rate sensitive sectors may not be adversely impacted as the impact on interest rates would be just marginal, if any.
However, in case the inflation rate does not come under control, the RBI would have to step in with tougher measures.
Economic Times, Financial Times, January 31, 2010, Page 3
There is adequate liquidity and interest rates will not move in the near future, says Ashish Gupta
The stock markets were keenly following the Reserve Bank of India (RBI) for moves to reign in inflation and ensure growth. This was for the simple reason that the inflation rate has been rising consistently. Interest rates and credit are important constituents for industry. Corporate performance is to a great extent tied up with the availability of credit and the cost at which it is available. Inflation is a major concern.
So, the RBI had the tough task of balancing growth and liquidity. In the credit policy review it has left its short-term interest rates unchanged, but raised the cash reserve requirements of banks by a higher-than-expected 75 basis points, to be implemented in two phases. It also warned of rising inflation. The RBI has increased the cash reserve ratio (CRR) by 75 basis points as against market expectation of 50. It has clearly indicated its intention to control inflation.
The RBI said it will anchor inflation expectations and keep a vigil on the trends in inflation, and be prepared to respond swiftly and effectively through policy adjustments as warranted. Further, the RBI will actively manage liquidity to ensure that credit demands of productive sectors are adequately met. It will also maintain an interest rate environment consistent with price and financial stability, and in support of the growth process.
The RBI has also hiked its forecast for GDP growth in the current year to 7.5 percent, from an earlier target of six percent, and said the current rate of growth is likely to be sustained in the financial year that ends March 2011.
The RBI had earlier pegged the growth rate at six percent and inflation at 6.5 percent. Assuming a near-zero growth in agricultural production and continued recovery in industrial production and services sectors, the baseline projection for gross domestic product growth for 2009-10 is now raised to 7.5 percent. Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the baseline projection for wholesale price inflation for end-March 2010 is now raised to 8.5 percent. On the assumption of normal monsoon and global oil prices remaining around the current level, it is expected inflation will moderate from July.
As an outcome, banks will start exercising a little more caution keeping in mind the fact that the RBI is so concerned about inflation. Banks are not expected to hike the rates immediately because there is excess liquidity in the system. The industry does not foresee interest rates going up in the near future because of the expected inflows and the liquidity condition at present.
The fact that interest rates have not been increased will continue to spur demand. There was a lot of anxiety on whether the government will pull back the various stimulus measures. The fact that interest rates have not been changed will now put the industry at ease.
The net impact on stock markets is expected to be neutral in the near term. With the raised GDP growth projections, the industry demand is expected to grow. Also, as the interest rates are expected to remain at their present levels in the near future, business plans of corporates will not be affected adversely.
All this may not impact the stock markets negatively. Especially so because the interest rate sensitive sectors may not be adversely impacted as the impact on interest rates would be just marginal, if any.
However, in case the inflation rate does not come under control, the RBI would have to step in with tougher measures.
Improved sales bookings aid Unitech profit in Q3
Improved sales bookings aid Unitech profit in Q3
The Hindu Business Line, January 31, 2010, Page 3
Our Bureau, New Delhi
The country's second largest real estate company Unitech Ltd on Saturday posted a strong 29.3 per cent rise in its consolidated net profit for third quarter of the current fiscal at Rs 176.01 crore compared with Rs 136 crore in the year-ago period. The growth came on the back of improved sales bookings, particularly in the affordable housing segment.
The total income in the just concluded quarter stood at Rs 788.32 crore, up 55.49 per cent over the same previous year, according to a company release.
“While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution,” said Mr Sanjay Chandra, Managing Director, Unitech Ltd.
Workforce spruced up
Accordingly, the workforce employed at project sites have been spruced up significantly; it currently stands at nearly 20,000 workers. The company added almost 5,000 workers every quarter to expedite the completion of its projects, the statement said.
“Structural work is complete in over 80 per cent of the past projects and nearly half of these projects are in handover or finishing stages,” Mr Chandra added.
The company continued to reduce its debt during the quarter and net debt to equity as of December 2009 stood at 0.55. In the first nine months of the current fiscal, company reduced its debt by Rs 2,854 crore. Total loan outstanding as of December was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance on December end.
The Hindu Business Line, January 31, 2010, Page 3
Our Bureau, New Delhi
The country's second largest real estate company Unitech Ltd on Saturday posted a strong 29.3 per cent rise in its consolidated net profit for third quarter of the current fiscal at Rs 176.01 crore compared with Rs 136 crore in the year-ago period. The growth came on the back of improved sales bookings, particularly in the affordable housing segment.
The total income in the just concluded quarter stood at Rs 788.32 crore, up 55.49 per cent over the same previous year, according to a company release.
“While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution,” said Mr Sanjay Chandra, Managing Director, Unitech Ltd.
Workforce spruced up
Accordingly, the workforce employed at project sites have been spruced up significantly; it currently stands at nearly 20,000 workers. The company added almost 5,000 workers every quarter to expedite the completion of its projects, the statement said.
“Structural work is complete in over 80 per cent of the past projects and nearly half of these projects are in handover or finishing stages,” Mr Chandra added.
The company continued to reduce its debt during the quarter and net debt to equity as of December 2009 stood at 0.55. In the first nine months of the current fiscal, company reduced its debt by Rs 2,854 crore. Total loan outstanding as of December was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance on December end.
RBI looks for a quick exit with 75-bps hike in CRR
RBI looks for a quick exit with 75-bps hike in CRR
Economic Times, January 30, 2010, Page 1
Urges Govt To Return To Fiscal Consolidation
Team ET MUMBAI
DUVVURI Subbarao on Friday sent out an unequivocal call for help to the government, likening his dilemma of exiting from an expansionary monetary policy to that of Pandava warrior Abhimanyu in the Mahabharata war.
In an uncharacteristically strong message, the Reserve Bank of India (RBI) governor told the government that it should help prevent a monetary policy trap by returning to the path of fiscal consolidation as the central bank began to hasten its exit with a 75-basis-point increase in banks’ cash reserve ratio (CRR), or the portion of deposits they must keep with RBI.
He kept interest rates at record lows and raised the economic growth and inflation forecast for the current fiscal year as business sentiment improves, industrial recovery gains momentum and the services sector grows with improved financing and easing global markets. Economic expansion is inflating commodity and asset prices too.
Abhimanyu, the star-crossed son of Arjuna, penetrated the labyrinthine ‘Chakravyuh’ erected by the Kauravas, but lost his life not knowing how to get out. Arjuna, the only other warrior capable of breaching the formation as well as escaping from it, could not come to his son’s aid as he was distracted fighting another battle.
“This time around, the policy decision was much more complex and challenging than in the last one-and-a-half years. Getting out of an expansionary policy is much more difficult than getting into it. I was telling the banks this morning it is like a Chakravyuh in Mahabharata—you know how to get in but not many people know how to get out,” Mr Subbarao told reporters after the quarterly monetary policy review.
The RBI governor is attempting a deft exit from the ultra-loose monetary policy that he walked into to avoid a serious economic crisis after the bankruptcy of Lehman Brothers in 2008. While the measures have mostly paid dividends, their sudden withdrawal could act as a drag on the improving growth rate, something which neither the political nor the business class wants to see.
As RBI attempts to contain inflation perceptions to pre-crisis levels of 4-4.5% and the medium-term objective of 3%, its objective could be frustrated by a large fiscal deficit, Mr Subbarao said in his policy statement.
“As the recovery gains momentum, it is important that there is co-ordination in the fiscal and monetary exits. The reversal of monetary accommodation cannot be effective unless there is also a rollback of government borrowing,” he observed.
SPRINGING A SURPRISE
What does the CRR hike mean?
While a 50-bps hike was factored in, RBI has surprised with a 75-bps hike. It appears to have gone in for the kill rather than take half measures.
Will the hike push up interest rates?
Unlikely in the short term, as banks are not finding enough takers for surplus funds. Home loan is the only segment showing decent growth, but competition may keep rates low. Govt borrowing targets in Budget will determine long-term rates.
What will this mean for banks?
Banks’ profits will come under pressure & their spreads will be narrowed by 7-10 bps. An increase in bond yields will also hit treasury profits.
Will inflation come down?
RBI expects prices to go up further before they start coming down in July. If the government does not overspend and there is a normal monsoon, prices are expected to fall in Q2 of FY11.
Rs76,974 cr Surplus liquidity since early Jan
Rs 36,000 cr
Liquidity to be sucked by CRR hike
Rs 2,21,369 cr Deposits banks need to raise in Q4’10 to meet 17% growth forecast
Rs 1,98,830 cr
Loans banks need to extend in Q4'10 to meet 16% growth forecast
Rs 7,000 cr Unfinished govt bond auction for the year
7.5%
Revised growth target for 2009-10
8.5% Revised inflation target for FY10
FDI & FII inflows to cross $50 b:Anand Sharma
FDI & FII inflows to cross $50 b:Anand Sharma
Economic Times, January 30, 2010, Page 4
Sudeshna Sen DAVOS
FDI into India is looking set to be more than $25 billion, and FII inbound flows should be more than $25 billion, estimates commerce minister Anand Sharma, though December formal figures aren’t out yet.
Mr Sharma, who had a private session with over 50 foreign CEOs, told ET that investor sentiment towards India was very positive in the series meetings he has had at Davos.
“The money is already coming in, and investor sentiment is very positive,” he told ET. Mr Sharma invited gathered CEOs to invest in R&D and innovation in geo-technology sector in India, at the same time pointing out that FDI flows work both ways, and Indian companies are now going outbound and investing in other economies and creating jobs globally.
He also defended India’s financial sector reform policies. “We leave the regulation of the financial sector to RBI, and the events of the past two years has shown the wisdom of this approach,” he said.
Selling the India story, Mr Sharma reiterated that the unified FDI policy, currently under discussion will subsume 177 Press Notes and be operational by March 31 to make things easier for foreign investors. In addition, he pointed to the government-industry initiative Invest India will help foreign companies in individual sectors.
Speaking to ET, Mr Sharma said that the biggest concern facing the world today is that the recovery, while it is happening, is very weak in developed markets. “It is universal, but not uniform,” he said. “The worry is that this may affect our trade flows, but confidence in India is very high,” he said. And it’s also why he advocates a cautious, deliberate, and perhaps sector by sector approach to withdrawing economic stimuli. “Not all sectors have recovered, and these sectors need time both globally and in India, we should look at a deliberate and cautious approach.” India, he adds, has already discussed its trade imbalance with China, and he has received assurance from the Chinese government that this will be tackled. While at Davos, Mr Sharma will meet up with 23 other ministers for a mini-ministerial on the Doha WTO round, what he calls an informal meeting to take stock. “We will see where the negotiators stand now, and discuss things at an informal level,” he said.
Economic Times, January 30, 2010, Page 4
Sudeshna Sen DAVOS
FDI into India is looking set to be more than $25 billion, and FII inbound flows should be more than $25 billion, estimates commerce minister Anand Sharma, though December formal figures aren’t out yet.
Mr Sharma, who had a private session with over 50 foreign CEOs, told ET that investor sentiment towards India was very positive in the series meetings he has had at Davos.
“The money is already coming in, and investor sentiment is very positive,” he told ET. Mr Sharma invited gathered CEOs to invest in R&D and innovation in geo-technology sector in India, at the same time pointing out that FDI flows work both ways, and Indian companies are now going outbound and investing in other economies and creating jobs globally.
He also defended India’s financial sector reform policies. “We leave the regulation of the financial sector to RBI, and the events of the past two years has shown the wisdom of this approach,” he said.
Selling the India story, Mr Sharma reiterated that the unified FDI policy, currently under discussion will subsume 177 Press Notes and be operational by March 31 to make things easier for foreign investors. In addition, he pointed to the government-industry initiative Invest India will help foreign companies in individual sectors.
Speaking to ET, Mr Sharma said that the biggest concern facing the world today is that the recovery, while it is happening, is very weak in developed markets. “It is universal, but not uniform,” he said. “The worry is that this may affect our trade flows, but confidence in India is very high,” he said. And it’s also why he advocates a cautious, deliberate, and perhaps sector by sector approach to withdrawing economic stimuli. “Not all sectors have recovered, and these sectors need time both globally and in India, we should look at a deliberate and cautious approach.” India, he adds, has already discussed its trade imbalance with China, and he has received assurance from the Chinese government that this will be tackled. While at Davos, Mr Sharma will meet up with 23 other ministers for a mini-ministerial on the Doha WTO round, what he calls an informal meeting to take stock. “We will see where the negotiators stand now, and discuss things at an informal level,” he said.
GMR Infra Q3 net profit plunges 85%
GMR Infra Q3 net profit plunges 85%
Economic Times, January 30, 2010, Page 13
PTI MUMBAI
GMR Infrastructure on Friday posted nearly 85% decline in consolidated net profit at Rs 9.2 crore for the third quarter ended December 2009.
The company had a consolidated net profit (after tax and minority interest & share of profit) of Rs 61.29 crore in the October-December quarter last financial year, GMR Infra said in a filing to the Bombay Stock Exchange (BSE).
However, the company’s consolidated net sales rose to Rs 1,066.72 crore during the third quarter of current fiscal from Rs 958.90 crore of the corresponding period a year earlier.
“In this quarter we have put in place catalysts that drives across sectors in time to come,” GMR Infrastructure Group chairman GM Rao said. GMR Infra is a Bangalore-based infrastructure major with interests in airports, energy and highways.
Economic Times, January 30, 2010, Page 13
PTI MUMBAI
GMR Infrastructure on Friday posted nearly 85% decline in consolidated net profit at Rs 9.2 crore for the third quarter ended December 2009.
The company had a consolidated net profit (after tax and minority interest & share of profit) of Rs 61.29 crore in the October-December quarter last financial year, GMR Infra said in a filing to the Bombay Stock Exchange (BSE).
However, the company’s consolidated net sales rose to Rs 1,066.72 crore during the third quarter of current fiscal from Rs 958.90 crore of the corresponding period a year earlier.
“In this quarter we have put in place catalysts that drives across sectors in time to come,” GMR Infrastructure Group chairman GM Rao said. GMR Infra is a Bangalore-based infrastructure major with interests in airports, energy and highways.
Your home, car loan rates won’t rise till Mar
Your home, car loan rates won’t rise till Mar
Economic Times, January 30, 2010, Page 14
But Corporates Who Borrow Short-Term Money At Sub-PLR Rates May Have To Cough Up More, Feel Top Bankers
Our Bureau MUMBAI
COMMERCIAL banks are unlikely to raise their prime lending rates — offered to the best customers — or deposits rates at least till the end of March. However, large corporates borrowing short-term money at sub-PLR rates may have to cough up more. This was indicated by CEOs of several commercial banks soon after RBI announced a 75-basis point (bp) hike in the cash reserve ratio, the proportion of deposits that banks have to park with RBI. However, car loan rates are unlikely to rise due to increased competition among banks in this segment.
The hike in CRR to 5.75% from 5% in two stages will suck out Rs 36,000 crore from the banking system.
“Despite the CRR hike, there is ample liquidity and thus in the near term rates will not rise,” said AC Mahajan, CMD of Canara Bank. “However,” said DL Rawal, CMD of Dena Bank, “rates will firm up only after March if credit shows signs of revival.” Banks have been parking Rs 75,000-85,000 crore with RBI at 3.5% under the reverse-repo window.
In the light of the CRR hike, CEOs feel that their net interest margins — the spreads between cost of liabilities and yield on advances — could shrink between 7 and 10 bps (a bp is .01%). That is because the cash parked by banks with RBI will not earn any interest, which, in turn, impacts NIMs. A senior SBI official told ET that a CRR hike will translate into an additional outgo of Rs 6,000 crore for the bank, but will have a marginal impact on its NIM. In the December quarter, SBI had surplus liquidity of Rs 75,000 crore.
For Punjab National Bank, the CRR hike will absorb around Rs 1,800 crore and shrink its NIM by 10 bps while for HDFC Bank Rs 1,500 crore will be impounded and NIM will narrow by 7-8 bps. Similarly, the respective figures for Union Bank of India are Rs 1,200 crore and 7-8 bps and for Canara Bank, Rs 1,600 crore and 7-8 bps.
Meanwhile, car loan customers are unlikely to be impacted by the CRR hike due to increased competition in the market. ICICI Bank had brought down its interest rates on car loans early this month. Responding to this, larger players in the car loan market such as HDFC Bank, Axis Bank and Kotak Mahindra also bought down car loan rates.
“The hike in CRR has to be adjusted and the impact will have to be passed on to customers. Hence, the sub-PLR advances would be impacted and reduce over a period of time,” said MV Nair, CMD of Union Bank of India and chairman of Indian Banks Association.
According to TY Prabhu, CMD of Oriental Bank of Commerce, short-term rates for corporates may go up but again this will depend on the surplus liquidity that each bank has with them. Large banks have surplus liquidity in the region of Rs 8,000 crore to Rs 10,000 crore.
“With the hike in CRR, banks will lend more to corporates instead of parking funds with mutual funds. The CRR hike will have little impact on margins but then loan growth will make up for it,” said Romesh Sobti, MD & CEO of IndusInd Bank. Meanwhile, Dhanlaxmi Bank MD & CEO Amitabh Chaturvedi said: “There is unlikely to be any immediate impact. There may not be an increase in both loans and deposit rates. Margins are unlikely to be impacted as there is enough money in the system.”
Economic Times, January 30, 2010, Page 14
But Corporates Who Borrow Short-Term Money At Sub-PLR Rates May Have To Cough Up More, Feel Top Bankers
Our Bureau MUMBAI
COMMERCIAL banks are unlikely to raise their prime lending rates — offered to the best customers — or deposits rates at least till the end of March. However, large corporates borrowing short-term money at sub-PLR rates may have to cough up more. This was indicated by CEOs of several commercial banks soon after RBI announced a 75-basis point (bp) hike in the cash reserve ratio, the proportion of deposits that banks have to park with RBI. However, car loan rates are unlikely to rise due to increased competition among banks in this segment.
The hike in CRR to 5.75% from 5% in two stages will suck out Rs 36,000 crore from the banking system.
“Despite the CRR hike, there is ample liquidity and thus in the near term rates will not rise,” said AC Mahajan, CMD of Canara Bank. “However,” said DL Rawal, CMD of Dena Bank, “rates will firm up only after March if credit shows signs of revival.” Banks have been parking Rs 75,000-85,000 crore with RBI at 3.5% under the reverse-repo window.
In the light of the CRR hike, CEOs feel that their net interest margins — the spreads between cost of liabilities and yield on advances — could shrink between 7 and 10 bps (a bp is .01%). That is because the cash parked by banks with RBI will not earn any interest, which, in turn, impacts NIMs. A senior SBI official told ET that a CRR hike will translate into an additional outgo of Rs 6,000 crore for the bank, but will have a marginal impact on its NIM. In the December quarter, SBI had surplus liquidity of Rs 75,000 crore.
For Punjab National Bank, the CRR hike will absorb around Rs 1,800 crore and shrink its NIM by 10 bps while for HDFC Bank Rs 1,500 crore will be impounded and NIM will narrow by 7-8 bps. Similarly, the respective figures for Union Bank of India are Rs 1,200 crore and 7-8 bps and for Canara Bank, Rs 1,600 crore and 7-8 bps.
Meanwhile, car loan customers are unlikely to be impacted by the CRR hike due to increased competition in the market. ICICI Bank had brought down its interest rates on car loans early this month. Responding to this, larger players in the car loan market such as HDFC Bank, Axis Bank and Kotak Mahindra also bought down car loan rates.
“The hike in CRR has to be adjusted and the impact will have to be passed on to customers. Hence, the sub-PLR advances would be impacted and reduce over a period of time,” said MV Nair, CMD of Union Bank of India and chairman of Indian Banks Association.
According to TY Prabhu, CMD of Oriental Bank of Commerce, short-term rates for corporates may go up but again this will depend on the surplus liquidity that each bank has with them. Large banks have surplus liquidity in the region of Rs 8,000 crore to Rs 10,000 crore.
“With the hike in CRR, banks will lend more to corporates instead of parking funds with mutual funds. The CRR hike will have little impact on margins but then loan growth will make up for it,” said Romesh Sobti, MD & CEO of IndusInd Bank. Meanwhile, Dhanlaxmi Bank MD & CEO Amitabh Chaturvedi said: “There is unlikely to be any immediate impact. There may not be an increase in both loans and deposit rates. Margins are unlikely to be impacted as there is enough money in the system.”
Telenor deal, affordable housing fuel Unitech net
Telenor deal, affordable housing fuel Unitech net
Financial Express, January 31, 2010, Page 1
fe Bureau, New Delhi
Debt restructuring, sell-off of the telecom business to Norway’s Telenor, and focus on affordable housing saw the country’s second largest real estate firm, Unitech Ltd post a jump of 29.37% in its net profit at Rs 176.01 crore during the October-December quarter. The company had posted a net profit of Rs 136.05 crore during the same period of the previous fiscal.
The period saw Unitech’s total income increasing 57.65% at Rs 774.46 crore, against Rs 491.24 crore during the same period of the last financial year.
Earlier in the week, the country’s largest real estate firm DLF Ltd posted a 30% decline in its net profit. Unitech was the most adversely affected real estate firm in the country last year after the global financial meltdown, with its share price crashing to around Rs 20. A company statement said the firm continued to reduce its debt during the quarter and net debt to equity as of December 31, 2009, stood at a healthy level of 0.55. During the first nine months of the current fiscal, the company reduced its debt by Rs 2,854 crore. The total loan outstanding as of December 31, 2009, was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance as on December 31, 2009.
Unitech said it launched over 30 new projects comprising an area of 24.42 million sqft in the first nine months, of which it has already received bookings for over 13.14 million sqft across Gurgaon, Noida, Greater Noida, Chennai, Kolkata, Mumbai, Bhopal, Lucknow and Mohali. The total value of sales bookings till December 2009 was approximately Rs 5,500 crore.
The quarter also saw Unitech emerging a key player in markets like Mumbai and Chennai.
The company received bookings for approximately 1.6 million sq ft in Mumbai and 1.75 million sq ft in Chennai during the first nine months of the current financial year.
Announcing the results, Sanjay Chandra, managing director, Unitech Ltd. said, “While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 31, 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution.”
Financial Express, January 31, 2010, Page 1
fe Bureau, New Delhi
Debt restructuring, sell-off of the telecom business to Norway’s Telenor, and focus on affordable housing saw the country’s second largest real estate firm, Unitech Ltd post a jump of 29.37% in its net profit at Rs 176.01 crore during the October-December quarter. The company had posted a net profit of Rs 136.05 crore during the same period of the previous fiscal.
The period saw Unitech’s total income increasing 57.65% at Rs 774.46 crore, against Rs 491.24 crore during the same period of the last financial year.
Earlier in the week, the country’s largest real estate firm DLF Ltd posted a 30% decline in its net profit. Unitech was the most adversely affected real estate firm in the country last year after the global financial meltdown, with its share price crashing to around Rs 20. A company statement said the firm continued to reduce its debt during the quarter and net debt to equity as of December 31, 2009, stood at a healthy level of 0.55. During the first nine months of the current fiscal, the company reduced its debt by Rs 2,854 crore. The total loan outstanding as of December 31, 2009, was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance as on December 31, 2009.
Unitech said it launched over 30 new projects comprising an area of 24.42 million sqft in the first nine months, of which it has already received bookings for over 13.14 million sqft across Gurgaon, Noida, Greater Noida, Chennai, Kolkata, Mumbai, Bhopal, Lucknow and Mohali. The total value of sales bookings till December 2009 was approximately Rs 5,500 crore.
The quarter also saw Unitech emerging a key player in markets like Mumbai and Chennai.
The company received bookings for approximately 1.6 million sq ft in Mumbai and 1.75 million sq ft in Chennai during the first nine months of the current financial year.
Announcing the results, Sanjay Chandra, managing director, Unitech Ltd. said, “While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 31, 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution.”
Panel recommends total review of SEZ Act
Panel recommends total review of SEZ Act
Economic Times, February 1, 2010, Page 11
NEW DELHI: The government should ’revisit’ its Special Economic Zone (SEZ) Act ’comprehensively’ and put a ban on transfer of common property and agricultural land for its implementation, a panel has recommended in its report. The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms has noted that concerns of tribals and farmers remained ’totally unattended’ under the Act as there was no cost-benefit analysis for such projects and also due to the absence of an upper limit fixed for land acquisition. The report of the committee, which was set up by the Rural Development Ministry in 2007, was submitted through the ministry to the National Land Reforms Council, headed by Prime Minister Manmohan Singh, sources in the ministry said. The committee noted that the status of ’deemed foreign territory’ to SEZs stands to undermine the institutions set up under (Panchayats (Extension to Scheduled Areas) Act, 1996) as also the rights of the individual citizens.
Economic Times, February 1, 2010, Page 11
NEW DELHI: The government should ’revisit’ its Special Economic Zone (SEZ) Act ’comprehensively’ and put a ban on transfer of common property and agricultural land for its implementation, a panel has recommended in its report. The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms has noted that concerns of tribals and farmers remained ’totally unattended’ under the Act as there was no cost-benefit analysis for such projects and also due to the absence of an upper limit fixed for land acquisition. The report of the committee, which was set up by the Rural Development Ministry in 2007, was submitted through the ministry to the National Land Reforms Council, headed by Prime Minister Manmohan Singh, sources in the ministry said. The committee noted that the status of ’deemed foreign territory’ to SEZs stands to undermine the institutions set up under (Panchayats (Extension to Scheduled Areas) Act, 1996) as also the rights of the individual citizens.
Parsvnath net jumps four fold
Parsvnath net jumps four fold
Business Standard, February 1, 2010, Page 3
Business Standard, February 1, 2010, Page 3
Stimulus withdrawal to hit growth
Stimulus withdrawal to hit growth
Financial Express, February 1, 2010, Page 3
Press Trust of India, New Delhi
In the backdrop of RBI’s advice to the government to withdraw some of the stimulus measures, industry chamber Ficci on Sunday cautioned it will be “dangerous” for economic growth and employment if fiscal incentives given to spur economy were rolled back.
Ficci’s comments come at a time when everyone is counting days for the big day of Budget,likely on February 25.
Ficci secretary-general Amit Mitra said it is a difficult choice between promoting growth and containing fiscal deficit, which is pegged at over 6% for the current fiscal due to duty cuts and increased public expenditure.
Financial Express, February 1, 2010, Page 3
Press Trust of India, New Delhi
In the backdrop of RBI’s advice to the government to withdraw some of the stimulus measures, industry chamber Ficci on Sunday cautioned it will be “dangerous” for economic growth and employment if fiscal incentives given to spur economy were rolled back.
Ficci’s comments come at a time when everyone is counting days for the big day of Budget,likely on February 25.
Ficci secretary-general Amit Mitra said it is a difficult choice between promoting growth and containing fiscal deficit, which is pegged at over 6% for the current fiscal due to duty cuts and increased public expenditure.
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